Report

Portugal: Future Outlook & Pipeline 2020

Portugal’s hotel, tourism and leisure sectors have been evolving favourably in the recent years with travel & tourism accounting for 16.5% of Portuguese GDP in 2019.

The strength of the market, fostered by government policy, boosted investments in the country’s tourism and hospitality assets, as evidenced by an increased number of transactions and new hotel developments. Everything suggested that Portugal would continue benefiting from this positive trend. However, the coronavirus pandemic has caused serious, but hopefully temporary damage to tourism and the hotel industry.

With more than 120 hotel projects and more than 14,000 rooms in the pipeline, and with Lisbon considered the 4th most attractive European city in which to invest, we have carried out an analysis of projects under development and the results indicate that many still consider Portugal to be an attractive and strategic hub for hospitality investment.

The COVID-19 pandemic disrupted this positive trend, challenging the industry’s resilience and adaptability. Despite this setback, there is optimism for long-term recovery, supported by ongoing development projects and expert opinions. 

Tourism in 2019
In 2019, Portugal ranked 12th in the World Economic Forum’s Travel and Tourism Competitiveness Index, climbing three positions since 2015. Travel and tourism contributed 16.5% to Portuguese GDP, with international tourist arrivals reaching 24.6 million, a 7.6% increase from 2018. Tourism generated €18.431 billion in revenue, accounting for 8.7% of GDP. The sector was responsible for 52.3% of service exports and 19.7% of total exports. 

Tourist Arrivals by Country of Origin (2019) 

  • Spain: 25.5% of total arrivals, an 8.2% increase from 2018.
  • United Kingdom: 15.4%, a 7.6% increase.
  • France: 12.6%, a 2.1% increase.
  • Germany: 7.9%, a slight decrease.
  • Notable increases: North America (+23.2%), China (+16.8%), Brazil (+13.9%), Ireland (+9.9%), and Canada (+9.6%).

Impact of COVID-19 in 2020
The pandemic severely impacted Portugal’s tourism, with a 71.9% drop in international tourist arrivals year-to-date by September 2020. Tourism receipts and expenditures fell by 54.4% and 43.8%, respectively. National tourism decreased by 59.1% in Q2 2020, and international tourism nearly halted, falling by 99%. The accommodation sector registered a 53% decline in room nights by September 2020, with 24.3% of establishments closed or inactive. 

Government Measures
The Portuguese government implemented various measures to support the tourism sector, including: 

  • €900 million in support for tourism companies. 
  • €90 million in financial support for tourism SMEs. 
  • An online consultancy program offering technical advice. 
  • Suspension of grant repayments for projects supported by “Turismo de Portugal”. 
  • The “Clean and Safe” label to promote safety. 
  • A €50 million campaign to stimulate internal demand. 

Future Outlook
The recovery of Portugal’s tourism and hospitality market remains uncertain, influenced by travel restrictions, vaccine developments, and political responses. The government expects a 50% reduction in international tourism revenue for 2020, translating to a 9% GDP decrease. Industry leaders anticipate no significant recovery until at least Q1 2021, with a gradual return to pre-pandemic levels expected. 

Economic Projections 

  • GDP: Expected to decrease by 8.0% in 2020, with growth projections of 5.2% in 2021 and 3.8% in 2022.
  • Investment: The market shows a relatively faster recovery than the 2011-13 recession, driven by a quicker rebound in investment.

Hotel Construction Pipeline
Portugal’s hotel construction pipeline remains robust, with continued investor interest: 

  • Lisbon: Ranked 4th in Europe for hotel development, with 38 projects and 4,173 rooms.
  • Pipeline Data: 93.5% of projects are in progress, with only 1.1% on hold or cancelled. The focus is on 4-star (56.5%) and 5-star (28.3%) hotels, indicating a trend towards upper upscale and luxury segments. 

Regional Development 

  • Lisbon, Porto, and Algarve: Key areas attracting investment, with diversification into less developed regions like the Douro Valley.
  • New Investments: Driven by programs like “REVIVE”, offering state heritage properties for private investment. 

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