I worked with a GM once who was running a resort in a market where the power went out every other day. Not brownouts. Full blackouts. Generators kicking on, guests standing in dark hallways, kitchen shutting down mid-service. He told me something I never forgot: "You can manage through a bad week. You can manage through a bad month. But when the infrastructure itself is broken... when the water pressure, the electricity, the supply chain are all failing at the same time... you're not managing a hotel anymore. You're managing a disaster with a reservation system."

That's Cuba right now. And three major hotel companies just made the same calculation within days of each other.

Iberostar is walking away from 12 properties effective tomorrow, June 1. Blue Diamond pulled its brands (Royalton, Memories, Starfish, and others) immediately. Meliá, which still has roughly 34 hotels and 5,000-plus rooms on the island, closed half its capacity in Q1 and posted a 68% drop in net profit with occupancy running at 34.1%. Let me say that number again. 34.1% occupancy. At a resort destination. In the Caribbean. That's not a soft patch. That's a market that has stopped functioning.

The stated reasons are a cocktail of severe blackouts, food shortages, supply chain collapse, and "operational limitations"... which is corporate-speak for "we literally cannot deliver the product our brand promises." But let's be honest about the accelerant here. On May 7, the U.S. designated GAESA (Cuba's military-run business conglomerate that controls most of the hotel infrastructure through its subsidiary Gaviota) as a sanctioned entity. Foreign companies got until June 5 to cut ties or face secondary sanctions. That's not a negotiation. That's an ultimatum. And layered on top of that, there are roughly 6,000 claims under the Helms-Burton Act valued at close to 8 billion euros targeting properties built on expropriated land. Iberostar and Meliá are both exposed. So the question stopped being "can we make this work?" and became "how fast can we get out before this gets worse?"

Here's what I keep coming back to, though. The sanctions are the trigger, but the infrastructure collapse was the underlying condition. These companies were already bleeding. Meliá didn't lose 68% of its net profit because of a May 7 executive order. That happened because the island's electrical grid, water systems, and food supply have been deteriorating for years. The sanctions just made it impossible to pretend the situation was temporary. I've seen this pattern before in different contexts... operators hanging on in a deteriorating market because they've got sunk cost, because they've got relationships, because they keep telling themselves "next season will be better." And then something external forces the decision they should have made 18 months ago. The exit isn't the failure. The failure was staying too long. And look... I'm not second-guessing the people who made these decisions. Running hotels in markets with collapsing infrastructure is a special kind of hell. You're asking your team to deliver a guest experience with unreliable power, inconsistent food supply, and a political environment that changes by the week. At some point, the brand promise and the operational reality diverge so far that keeping your flag on the building does more damage to the brand than pulling it. This is what I call the Brand Reality Gap. The brand sells a promise... in this case, a Caribbean resort experience with everything that implies. The property delivers that promise shift by shift, room by room. When the gap between promise and delivery becomes unbridgeable (and 34% occupancy tells you guests have already figured it out), the flag comes down. Not because anyone wants it to. Because the math and the guest experience both demand it.

The question nobody's asking yet: what happens to the 5,000-plus Meliá rooms still on the island? To the staff at those 12 Iberostar properties? To the Canadian tour operators who were still selling Cuba packages? Air Canada, WestJet, and Transat have already been pulling back for months. The Canadian government has Cuba at "avoid non-essential travel." This isn't a temporary disruption. This is an entire destination falling off the map for international hotel brands. And for anyone watching from a different market with their own infrastructure headaches... pay attention. The distance between "manageable challenges" and "we're pulling our flag" is shorter than you think.

Let me tell you what this deal actually is, because "IHG One Rewards members can now book five Iberostar all-inclusives" is the headline, and the headline is the least interesting part.

IHG signed a 30-year licensing agreement... with a 20-year renewal option... to slap its loyalty program onto up to 70 Iberostar properties and 24,300 rooms. Iberostar keeps 100% ownership. Iberostar keeps operating the hotels. Iberostar keeps its name on the building, its family running the company, its staff making the beds. IHG gets fee revenue it projects will exceed $40 million annually by 2027. For what, exactly? For plugging Iberostar into its reservation system and letting IHG One Rewards members earn and burn points at the beach. That's it. That's the product. And honestly? From IHG's side of the table, it's brilliant. They added roughly 3% to their global system size without buying a single towel. The total gross revenue of this initial portfolio was approximately $1.3 billion in 2019, which means IHG just bolted on 4% revenue growth (on paper) by writing a licensing agreement. No capital deployed. No operating risk absorbed. No 2 AM phone calls about a broken chiller in Cancún. Just fees. The asset-light model taken to its logical extreme isn't asset-light anymore... it's asset-nonexistent.

Now here's where I stop admiring the chess move and start asking who's paying for it. Because someone always is. You're an owner flagged with IHG at a 250-key resort property in the Caribbean or Mexico. You're paying your franchise fees, your loyalty assessments, your reservation system charges, your marketing contributions, your PIP costs. You're delivering the IHG One Rewards promise every single day with your staff, your capital, your operational headaches. And now IHG has figured out how to sell that same loyalty program to a competitor property down the beach... one that didn't have to go through brand standards review, didn't have to renovate to spec, didn't have to sign a franchise agreement with teeth... and IHG collects from both of you. I sat in a brand review once where an owner asked the franchise rep, point blank, "If you're licensing our loyalty program to properties that compete with me, what exactly am I getting for my fees that they're not getting for theirs?" The rep pivoted to talking about "the power of the network." The owner didn't ask again. He just stopped renovating beyond the minimum.

This is part of a much bigger pattern and it's not just IHG. Marriott, Hilton, Hyatt, Accor... they're all racing into the all-inclusive space because the economics are irresistible from the brand side. The luxury all-inclusive segment in Mexico alone has nearly doubled its share of supply, from 17% in 1990 to 33% by 2022. That's real demand. But the brands aren't building resorts to capture it. They're licensing their loyalty programs, their distribution pipes, their reservation infrastructure to operators who already built the resorts. The brand gets the fees and the system-size press release. The existing franchisees get a diluted loyalty program and a new comp set member they didn't ask for. And the "Exclusive Partners" (IHG's actual term for this category, which deserves some kind of award for corporate euphemism) get access to 100 million loyalty members without the full weight of brand compliance. If you're the owner who just spent $4 million on a PIP to stay in compliance, tell me that doesn't sting.

The question nobody in the brand presentations is answering is the Deliverable Test question... what does the IHG One Rewards member actually experience when they show up at an Iberostar property expecting IHG-level loyalty recognition? Does the front desk know the tiers? Does the system talk to the PMS in real time? Is there a genuine integration or is this a glorified hotel listing with a points sticker on it? Because I've read enough FDDs and I've watched enough of these "strategic alliances" play out to know that the press release is always the high-water mark. The integration is where the promise either becomes real or becomes another brand disappointment that the property-level team has to explain to a confused Diamond member standing at check-in. IHG says earning launched in June 2023 and redemptions went live in December 2023, with over 40 properties bookable with points by then. That's the timeline for the infrastructure. The timeline for the EXPERIENCE... for it to actually feel like staying at an IHG property... that's a completely different question, and one that only the guest can answer.