How Portugal’s hospitality business has bounced back

INTERNATIONAL REPORT — Portugal’s hospitality industry is experiencing an impressive comeback post-COVID, according to a study from Global Asset Solutions.

In 2023, more than 30 million tourists traveled to Portugal, and more than 70 million overnight stays were generated in 2022 (which was 99% of pre-pandemic levels). RevPAR also exceeded pre-pandemic totals in 2022 by reaching €50 (it hit €56 in 2023). Click here to download the report.

“Portugal’s government has made a concerted effort to back tourism in recent years, with a new visa regime, tax incentives for investors and investment in infrastructure, including a new airport in Lisbon and a high-speed train line between Lisbon and Madrid,” said David Bóveda, hotel asset manager and co-author of the report. “This focus has paid off, and the country is one of the most attractive destinations to European overseas visitors, bringing international investors eager to capitalize on this active market.”

Hotel investment in Portugal has also experienced a significant resurgence post-COVID. The volume of transactions for 2022 exceeded the previous record set in 2019, reaching a total of €1.2 billion. The fourth quarter of 2022 was the highest quarterly sales volume ever, totaling almost €900 billion. Hotel transactions are increasingly taking the form of portfolio deals and are expanding beyond Lisbon.

Cross-border investment in the country’s hotels reached a record high of €188.5 million in 2022, a figure that was already surpassed in the first seven months of 2023, with net incoming investment totaling almost €262 million.

Portugal currently provides more than 113,000 rooms, mainly in the 3-star category. According to the report, the trend is shifting toward an increase in 4- and 5-star rooms while lower-rated accommodations are decreasing. The country has over 11,000 rooms in the pipeline in different stages of construction or planning, with Lisbon leading the way with a 14.8% increase in supply.

Out of the rooms in the active pipeline, 73% will be branded, with Accor and Meliá accounting for the majority at 9.2% and 8%, respectively. Over a third of the new supply will fall into the upscale category, primarily in Lisbon. Five percent of the new supply will be in the luxury segment.

“Last year was record-breaking for tourism in Portugal, and the country is set for another strong year in 2024,” Bóveda said. “With more supply coming online and much of it in the luxury sector, specialist asset management will be critical for investors seeking to make the most of this opportunity.”

The Tourism of Portugal entity published a report on tourism strategy for 2027, which said the country’s current performance has exceeded the expectations set when the strategic plan was initially released in 2021. The initial expectation was a 4.2% average annual rate, but Portugal is approaching the high-tier growth forecast of 6.1%.