Why Portugal is on a winning streak

Azenhas do Mar, Portugal

According to Portugal's hotel association, the AHP, 41 new hotels are due to open in the country this year, with a further 42 in 2018. With Avani debuting its first European property in Lisbon, investors and operators are seeing the opportunities in a revitalized market. 

The AHP told the local press that the country’s pipeline included properties with as many as 300 guestrooms.

Road to Recovery

Portugal’s economy has seen a recovery from the impact of the Eurozone’s debt crisis. In mid-May the European Commission said the country was no longer in breach of budget rules because its deficit fell to 2 percent of gross domestic product in 2016, below the 3 percent limit. GDP growth for the first quarter of this year was up 2.8 percent on the year, aided in part by tourism.

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The World Travel and Tourism Council reported that, for 2016, the direct contribution of travel and tourism to Portugal’s GDP was $13.3 billion, 6.4 percent of the total GDP and is forecast to rise 2.8 percent in 2017, and to rise 2.2 percent per year from 2017-2027, to $16.9 billion and 7.3 percent of total GDP in 2027.

According to a study from Christie & Co, rising interest from travelers was also driven by the mild weather, affordable room rates compared to other tourist destinations in Western Europe (notably France, Italy and the UK) and the comparison with the current instability in a number of North African and Turkish markets.

“We are of the opinion that the interest in Portugal is not exactly related to Spain being full but it is a great destination in its own right,” said Inmaculada Ranera, managing director, Spain & Portugal, Christie & Co. “The three main attractive areas in Portugal are the Algarve on the resort market and then Lisbon and Porto as urban destinations. The Algarve area is also taking advantage of the issues that other Mediterranean and Northern Africa countries are experiencing and it is perceived as a safe destination, so it is competing with Andalucía, and Lisbon and Porto are increasing their attractiveness as a short break destination and, especially Lisbon, compete with other Spanish and European cities.”

The company reported 1,854 hotels in Portugal, with 71 percent of the room stock in the three- and four-star market. The cities are benefitting as much as beach destinations, with Lisbon seeing a 22.1-percent increase in revenue per available room for the first four months of the year, to €67.31, according to STR. According to the research company, Lisbon has seen consistent growth since the beginning of 2016, “as many tourists have chosen destinations in Portugal or Spain due to ongoing security concerns in other markets.” 

According to PwC, Porto, the country’s second-largest city, is expected to lead RevPAR growth in 2017 with an increase of almost 15 percent anticipated, with 12.8 percent growth expected for the year after. 

Xavier Batlle, Christie & Co’s senior consultant for Spain and Portugal, added that the company had seen “growing interest” among both investors and operators.

Who's Building

One operator to plant its flag has been Minor Hotel Group’s Avani, which opened the 119-guestroom Avani Avenida Liberdade Lisbon Hotel at the start of May, the first of the brand to open in Europe.

“Lisbon is the perfect fit for the Avani brand, as it has an incredible sense of design and community and it is affordable,” said Alejandro Bernabe, group director at Avani Hotels & Resorts. 

Other hotels in the pipeline include the W Algarve, due to open in 2018. 

The country’s government is eager to keep the momentum going and has set a target of 80 million overnight stays and €26 billion in revenue by 2027—double the figures seen in 2016.

There's another good reason why Portugal is in the spotlight: The country won this year’s Eurovision song contest for the first time in 53 years. Under Eurovision rules, the winner hosts the event the next year, a clause that has led to rumors of countries throwing the contest in the past. In Portugal’s case it looks an honest victory: The country has no problems filling its rooms. 

Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.