“Top Management”
Five reasons to believe
In conversations I maintain with managers working for Portuguese and international corporations that are considering an entry into hospitality in Portugal, one of the questions I am most often asked is regarding the sustainability of the dynamics we observe today.
I usually structure my answer around five big ideas.
1 – A globally thriving industry
More than the growth by a factor of 50 since the 1950s, the analysis of a long series of the number of tourists in the world is impressive for its resilience. Although we know that this is one of the industries most impacted by cycle changes, there are only three years, since 1950, in which the indicator suffered a drop, all of them associated with brutal discontinuities, such as the oil shock, the end of the bubble of the so-called “new economy”, or the recent sovereign debt crisis.
The International Tourism Organization (UNWTO) also estimates that the number of tourists will multiply bya factor of 1.5 over the next 15 years. Demand will be there. Which destinations it will head to is, of course, another question.
2 – Portugal’s indicators
The evolution curve of hospitality guests in Portugal seems to have been taken from the evolution curve of tourists in the world: the same trend, the same specific inversions at the same moments, illustrating the profoundly global nature of this business.
However, from 2013, everything changes. The curve shoots and heads straight into the sky, in a phenomenon that appears to be a statistical or data entry error. You may not be aware, but between 2012 and 2017 global hotel revenue increased by 83%. That’s almost a doubling in just 5 years! And if you think that the gain was all absorbed by the crazy growth in supply, wait a minute – RevPAR increased 73% in the same period.
It is also interesting to observe how growth is relatively homogeneous among tourism regions with very different profiles and degrees of maturity – An annual average, in the last 5 years, between 10% in Madeira and Alentejo, and 15% in the North of Portugal.
Please also note that we are only talking about Hotel Establishments. The explosive growth of Airb-BNB-style short term rentals (“Alojamento Local”) is not included.
3 – The upgrade to the first league
No matter how badly things go, it is difficult to imagine a scenario in which all this would be lost. Certainly, a slowdown, or a possible fall in a more extreme scenario, are likely, but history shows that you don’t fall from the tenth to the fourth floor. You just take it from the ninth, where the view is almost the same.
It is interesting to look at international comparative studies, such as the well-known European Cities Hotel Forecast, by PWC. Despite its non-representativeness – it is based on a biased sample of hotels that is not consistent over time – the evolution of RevPAR is still extraordinary. Since 2013, Lisbon has risen from 16th place to 8th, and Porto, which only entered the ranking in 2016, is now in 11th place.
The trendiness will pass. But throughout this process, Portugal gained awareness and “word-of-mouth” like never before, having joined the chart of major international destinations. This will stay.
4 – Finally, a political priority
Tourism has always been the poor relative of the economy. Undervalued, without any strategy or long-term vision, it dragged on for decades below potential, before the frustration of sector agents. But in the last ten years the scenario has changed radically at all levels.
In fact, in a tense political climate based on the logic of reversal, few sectors provide such a good example of the virtuosities of stability as tourism. Just look at the phenomenon of “Alojamento Local” – Bernardo Trindade opened the door, Adolfo Mesquita Nunes developed and regulated it, and Ana Mendes Godinho continues to consolidate and manage, with common sense, the challenges brought by success.
5 – The structural factors of competitiveness
This is perhaps the most important argument of all. Regardless of circumstances and setbacks, Portugal has structural competitiveness factors that only give us reason to be optimistic. In fact, if you look ahead twenty years, what other industry would you invest in to guarantee employment for your children or grandchildren?
The World Economic Forum annually publishes a comparative report on the competitiveness in tourism of 136 countries around the world. Portugal occupies the 14th place in a ranking led by Spain. Factors such as the wealth of natural and cultural resources, tourism and road infrastructure and the priority given by political agents contribute to this excellent result.
There are reasons to believe in tourism in Portugal. They won’t disappear with the next bump.
A CONTRIBUTION FROM…
Adolfo Mesquita Nunes | Lawyer, Former Secretary of State for Tourism
Of the current dynamics of tourism, how much is cyclical and how much is structural?
Demographic, cultural and economic factors make tourism a growing activity. There are more people with more purchasing power taking more trips. It is therefore a structural dynamic, which will remain intact unless the world order changes due to political instability, war, terrorism, or catastrophes. Whether Portugal can increase its market share, is another thing. We have the conditions for this because we do not have structural obstacles (Lisbon airport is cyclical) that would prevent it.
What could go wrong?
In a competitive market, there are policies that disrupt growth: protectionist policies, defending companies from competition; conservative policies, stuck in outdated practices (digital marketing, for example, is evolving); populist policies, which see tourism as a capitalist threat to be contained; the politicization of tourism, transforming it into a propaganda instrument.
What should be the priority for the next decade?
Artificial intelligence and meta-data. Whether in the public sector, for promotion and management of the destination, or in the private sector, for structuring supply and understanding demand, both are crucial for competitiveness in tourism, one of the sectors most exposed to the digital economy. We should be working towards being not just a destination but the leading country in the digital economy in tourism, an objective within our reach, that would increase its relevance in our economy. This requires boldness and leadership.
Written by Filipe Santiago
July, 2018
This article was published in Publituris Hotelaria as part of the “Top Management” series. You can access the printed version here and the online version here.

