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Luxury evolves in Portugal

By Katherine Doggrell, Co-Founder for NewDog PR
10 June 2022
6 min read
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The luxury hotel market is evolving in Portugal, with a move away from a focus on resorts and an increase in experience-driven and boutique properties, according to the latest webinar hosted by the ILHA’s EMEA chapter.

In the past 10 years, Portugal’s hotel market has matured from tour groups and resorts to attracting diverse international guests, which support a burgeoning luxury hotel market. With global brands and investors targeting the country, the panel looked at what the future holds for Portugal and how the hotel sector had worked with government to achieve its success.

The need to work together was underlined by Luís Araujo, president of Turismo de Portugal, who said: “Tourism needs resources. It depends heavily on the territory, and the development of public policies in each country.

“So what we’ve been doing is building a very strong connection with the private sector. We also work as an investment agency for many of the projects that are being being developed here in Portugal.

“Everything we do has been about developing a strategy and, just to give you an idea, in 2019, we had 27 million guests in our country and we increased revenues in four years by 60% and this was after launching our strategy; to be the most sustainable, or one of the most sustainable destinations in the world.”

Araujo’s comments were supported by Chitra Stern, owner, founding board member & CEO, Martinhal Family Hotels & Resorts. Stern said: “I had the pleasure of seeing the strategic national plan for tourism in 2007 and I was impressed at how organised the country was. It brings the private sector together with the government objectives, which is very intelligent and advanced.”

The panel agreed that one of the key factors in having a successful strategic plan was that there was no politician or role linked to it, keeping the strategy away from the whims of politics.

Speaking on the ease of development, Frederico Costa, COO Pestana Hotel Group for the Pousadas, for Europa and Americas, said: “For the last 10 years, for every hotel that we open abroad, we, have opened two in Portugal. And we keep investing in Portugal, not only because we are Portuguese company, but because the numbers are here.”

The luxury sector has expanded in recent years with the help of improved airlift. Araujo said: “Seventy per cent of our tourists are foreigners, and 90% of them come by ‘plane. So connectivity is hugely important. We have improved connectivity and reduced dependence on our five main markets inside Europe and we have grown a lot in the US, Canada, China and Brazil.”

Stern added: “There has been such an evolution in niche boutique, luxury travel, in the 21 years that I’ve been here. The appetite for investment is huge. I’ve never seen so many people moving here – we are seeing a lot of residential tourism.”

The growth in appetite was attracting investors from both within the country and overseas. Eduardo Abreu, partner Neoturis, said: “Today, investors are looking for opportunities in the five star and luxury markets. Six months ago we had 14 tenders for a project in Lisbon with ADR of €500.

“We have some consistent EU, USA, Brazilian and Middle East demand, what was not the case 10 years ago, and these are the markets that bring the prices up, and not only in Lisbon, but in all other geographies.

“The operators strongly believe that there is space for more more rooms in the five star luxury segment and as the operators believe, then the investors believe. We see some very significant ADRs with boutique hotels that are in what were secondary locations 20 years ago. The market is there and the confidence of the investors is huge.”

Costa commented: “I remember 10 or 15 years ago, tourism was not a priority for banks but since then things have changed. They saw the opportunity. They saw people investing in tourism, making money and paying their debts.”

Araujo added that there had been a “huge improvement” in the perception of tourism by the financial institutions, telling the webinar: “We work a lot with developing new products and high end products. We’re pretty much focused on promoting our contemporary art, our literature, cycling and walking,, our oceans. It’s a lot of searching for purposes to travel.

“We have a programme that was launched five years ago, Revive, which looks at public buildings like monuments, palaces, monasteries, castles in Portugal, that are completely abandoned and which are available to the private sector to invest in and use. Most of these buildings are outside of the big cities, outside of the big destinations, but so far they have been very profitable.

“So please consider and think about the interior of the country, especially considering the new trends in consumers. There are huge opportunities and our role is not only to promote those opportunities, but to promote a new product, especially in high end segments.”

Costa – whose company had developed a former monastery – said: “We are very happy with these trends. Getting into the interior, getting to the real Portugal, allows people to be with the local communities, with the culture and that’s a trend we’re seeing everywhere in the world.

“We are not forgetting the big hotels in resorts and in the Algarve, but the opportunities will be in these different destinations.”

Stern added: “Portugal is a quarter the size of California and I call Portugal the California of Europe. It’s true on so many fronts; you see a lot of variety. There is 900 kilometres of coastline. You go up north, you’re into the mountainous wine region. So you got to think about what your product is going to be and find the right niche for your product.”

The success of the country had meant increase not only of investors into projects, but transactions. Abreu said: “The market is very active and we are seeing price per key much higher than five, six, seven years ago, we are reaching European levels. When something comes to market we have 10, 20 proposals. And we are not seeing prices fall, we don’t see a lot of bankruptcies because the people are resilient, they have saved their cash over the past two years.”

Costa concluded: “The time of cheap opportunities in Portugal was a long time ago, fortunately, and it is a sign that the market is working. I’m very happy with the path we’re on as a destination.”

A path that is getting more and more luxurious with each passing year.