Portugal’s tourism sector continues to make waves, with impressive numbers in 2023 and ambitious plans for the years ahead. In 2023, the Portuguese tourism sector generated €25 billion, marking year-on-year growth of 19 per cent, with visitors to the country growing 13 per cent to 30 million.
Spike in the Americas
Elisabete Félix, business development director at Turismo de Portugal noted the sector’s stellar performance, highlighting a significant improvement in international tourist interest in the country.
“In the past few years, markets with high growth rates include the US, Canada and Brazil - in 2023, the US saw year on year growth of 33.7 per cent, Brazil grew 13.1 per cent, and Canada grew 57.4 per cent. For the January to July 2024 period, the US market has grown by 13.5 per cent and the Canadian market has grown by 20 per cent,” Félix said during a roundtable discussion at the Resort & Residential Forum 2024.
And the American market has continued its rapid ascent, says Francisco Sottomayor, CEO at investment management firm Norfin, noting that its 13 per cent year-on-year growth in 2024 makes it the fifth-largest market for Portugal, overtaking France.
The strength of regional markets
Digging deeper into the country’s performance and potential, it’s clear that Portugal’s regional markets - led by the Algarve and the Lisbon surrounding areas – have played a significant role in the success story, and are set to continue doing so as investment interest in the regions continues to grow.
Across all of Europe, Portugal has the second highest pipeline, says Rahimali Padania of STR, with Sottomayor adding that that there are 100 projects in the pipeline for the next few years, adding about 10,000 new keys. This follows the positive trend of continuous growth in the market, Sottomayor says, with around 50 new hotels added per year over the last three years.
The Algarve retains its status as Portugal’s most mature tourism destination. Sottomayor highlights the region encompasses most of the supply for the country, with more than 27 per cent of the national hospitality supply of keys, followed by Greater Lisbon, the North, the centre, Madeira, Alentejo and finally Azores. Furthermore, he notes that from May next year, numbers from the US will be aided by direct flights between New York and the Algarve, a development which he describes as a “game changer” for American inbound tourism.
This is as the Algarve saw a 5.2 per cent growth in overnight stays - around 1 million – with British visitors accounting for 28 per cent of overnight stays in the Algarve versus 13 per cent across all of Portugal.
Branded pipeline
Padania goes further to highlight that the Algarve has 3,000 rooms in the pipeline, with majority of the pipeline driven by branded hotels. He adds: “If existing supply gets converted, the Lisbon surrounding supply will grow by 20 per cent, followed by Lisbon itself which will grow by 11 per cent. Looking at branded supply versus pipeline, the focus for investors is more inclined towards branded properties rather than independent - and Lisbon surrounding leads there.”
The segmentation of this pipeline is closely focused on four and five star – jointly 68 per cent of supply – evidencing the growing focus on the upper segments and the growing shift in positioning of Portugal’s tourism from affordable to high end and luxury segments. A significant part of this pipeline is focused in the Porto region which encompasses the city of Porto and the Douro wine region.
Occupancy and ADR
This growing interest comes as the regions – and the country as a whole – have enjoyed a healthy recovery of occupancy and ADR post-pandemic.
“Year to date occupancy for Lisbon is around 71 per cent and for Porto is around 74 per cent. While these are 3 to 4 per cent below 2019 levels, the Algarve has already achieved 2019 levels and has grown by a further 3 per cent. In terms of summer occupancy, in the Algarve it reached almost 81 per cent,” Padania explains.
He adds that resorts have provided a platform for continued ADR growth, with Algarve leading the way up to September 2024 seeing year-on-year growth of 9 per cent followed by Lisbon’s 7 per cent and Porto’s 4 per cent growth.
Looking forward
The rise in ADR has also driven year-on-year positive RevPAR growth across all segments, from luxury to upper-midscale. Looking ahead, he says “In Lisbon, we are anticipating revpar growth of 3 per cent for 2025. On the question on whether ADR growth can be sustained, we believe that revpar in 2025 and 2026 will be more driven by occupancy, and as we move into 2027 and 2028 we’ll see a balance between occupancy and ADR.”
Sustaining the positive outlook, Félix adds: “We believe that the excellent results already achieved in 2023 will be surpassed, highlighting that the results are in line with the goals outlined in the Portuguese government’s Tourism Strategy 2027, which aims to position the country as one of the most developed and sustainable tourism destinations in the world. Félix notes that building on this, a new strategy is being developed, setting goals and targets until 2025 while still maintaining a strong emphasis on sustainability and environmental priorities.
It seems Portugal’s tourism sector is set to continue thriving, fuelled by robust visitor numbers, ADR growth, increased brand/investor interest and a focused shift towards high-end and sustainable tourism. However, sustaining momentum will require balancing expansion with sustainability, ensuring that Portugal continues on its path to set the benchmark as a global tourism leader.