Portugal’s hospitality sector opened 46 new hotels last year but the number is tailing off as land prices rise and there is a feeling among investors that the market already is become saturated.
For 2017 there are plans for 13 more hotels just in Lisbon and in the current year, 29 more hotels are to be launched.
Portugal’s tourist numbers are booming and the hotels that are planned are mostly in the 4 and 5 star categories.
Despite the wave of optimism, there already has been a drop in investment, according to the Hotels Association of Portugal which sees market saturation as a looming problem.
"We are starting to get to a point where we risk having excess supply," according to Miguel Judice, the Chief Executive of Thema Hotels.
"The supply of hotels grew 10% in 2015, but there now are many other platforms such as Airbnb and we are competing for the same tourists."
Most of the new hotels opening this year are in Lisbon with the north of the country coming second with six new hotels coming on stream, only one of which is in Oporto where seven new hotels opened last year.
"There is a correction in a market which is not able to absorb all these new hotels. There are some investors who begin to question whether there are too many hotels,” says José Roquette, the Chief Development Officer of Pestana hotels.
"The investment cost has increased, despite optimum financing conditions," explained Roquette, "in Lisbon the average price per square meter increased 30% between 2014 and 2015."
Cristina Siza Vieira, president of the Hotels Association of Portugal, recognises that "capacity is already above demand. The slowdown of supply is, therefore, perfectly natural. Fortunately there’s been an ‘optimisation of the installed supply’."
Despite overnight stays at record levels, leading to record revenues, the main indicators remain below pre-crisis levels.
The occupancy rate across the country was 65% in 2015, slightly below the 67% achieved back in 2007. The difference was even more pronounced in the average revenue per tourist figure which fell from €111 to €105 last year.
Miguel Judice adds that the sector "has to invest in the business segment, conferences and events, especially in the low season which will get even lower with the appearance of new hotels."
