Increasing demand for hotel rooms in Lisbon put the Portuguese capital at the top of HVS’s HVI league table in terms of value growth for 2017, up 14.7 percent on the previous year, and its fourth consecutive year of double-digit growth.
HVS said that among international investors, developers and lenders, interest in Lisbon was on the rise, with the city showing strong market fundamentals going forward.
“The trend has been very positive in 2017, with growth in passenger numbers, visitor numbers and bed nights, due to the increased awareness of the destination,” Dayk Balyozyan, senior associate, HVS, said. “The city has also benefitted from the unfortunate circumstances in other destinations and has seen RevPAR growth of more than 20 percent.” Visitor numbers from China are increasing, Balyozyan said, aided by direct flights from Beijing. While the leisure market is dominating the city’s travel sector, the meetings and events market is also improving. Balyozyan noted that the Web Summit conference had transferred from Dublin to Lisbon starting in 2016.
The message was echoed by PwC, in its analysis of the prospects for the hotel sector in 12 national or regional capital cities for 2018-19, forecasting 7 percent RevPAR growth for Lisbon this year and 6.5 percent in the next.
“Continuing global and regional economic recovery should continue to support strong leisure and business demand for travel and hotels,” Liz Hall, head of hospitality and leisure research at PwC, said. “2017 was a record year for travel and we remain cautiously optimistic and forecast further RevPAR growth in most of the cities analyzed. With occupancies already high, we expect ADR gains to drive much of this growth.”
For those looking to target the city, Balyozyan said that the main developments are boutique hotels converted from traditional Portuguese buildings. “Compared to other international capitals in Europe, there is a lack of international brands, and we are likely to see an increase in conversions,” Balyozyan said. Earlier this month, Meininger Hotels and developer Nelson Canal Portugal signed an agreement for a 121-room hotel in Lisbon, due to open in 2019. The two companies will convert a former office building into the new six-story Meininger Hotel.
But while brands like Meininger are keen on the city, they may face some barriers to entry. “There is a lack of space in the city to develop,” Balyozyan said. “In terms of transactions, it has been a bit limited. Many owners are Portuguese families, but we are seeing more and more insurance companies coming in.”
Another challenge facing developers is the city's airport capacity. “The authorities are looking at developing another, but they are still in discussions,” Balyozyan said. “The return of other European cities like Istanbul and Paris could also impact Lisbon, but less so now that Lisbon is on the map. The city has a lot of to offer.”
With Marriott International, Meliá Hotels International and Iberostar already gaining a foothold in the city’s pipeline, the race for Lisbon's market share has already begun.
Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.