The recovery of Portugal’s tourism market is expected to continue over the remaining months of the year, according to the 'MarketBeat Autumn 2014' report from consultant Cushman & Wakefield, with the British support of Portugal as a destination holding firm under threat from the Germans.
According to the report, in the first half of 2014 there was a 11.3% increase in the number of hotel guests in Portugal to 7.1 million and 11.4% increase in overnight stays to 19.5 million, welcome news for the sector and a relief for the government whcih now has at least one sector with constantly improving results.
The income for the tourism sector was up 12.1% to €894.4 million and is helping keep the trade deficit from becoming too embarrassing.
The consultancy firm added that profitability is a problem within the sector as the low prices needed to attract tourists affecting the profitability of most hotel operations.
This adds weight to the argument by the hotel and restaurant sector for the government to think again about reducing the VAT rate to the old 10% level to enable fairer competition with Spain where the sector charges 10%, not 23% as in Portugal.
The tourism market is nothing but adaptable, as “the hostel format should continue to proliferate particularly in urban centres, as well as serviced apartments, a format with increasing demand from both leisure and business tourists." The well publicised opening in Faro of a cheap and cheerful hotel was among several in the country, appealing to the backpacker type, younger tourist market.
The main challenge for the sector is the return on assets, which over recent years has culminated in several tourism projects going into administration, many now being run with interim management teams.
There is some relief for the banks that hold the debts of these failed businesses as several major international investors are interested in acquiring debt funds based on distressed property assets in the hotel sector and venture capital managers are active in the market looking for buying opportunities.
In the first half of 2014, Lisbon and the Algarve continued to be the most sought after locations for tourists with 60% of total overnight stays at large national hotel brands.
Lisbon saw a big increase compared to 2013 with 14.5% more nights spent, followed by the Algarve with a growth rate of 13.1%. However, it was the Alentejo region that had the highest growth of 16.8%, much of the increase due to a resurgence in Spanish tourists.
The Brits lead the field with their long love of Portugal accounting for 24% of total overnight stays, followed by the Germans with 15% and the Spanish are back at 9%, a growth over the same period last year of a whopping 22.5%.
