Portugal’s Hotel Market Outlook for 2024: A Promising Landscape

Portugal’s hospitality industry is witnessing an extraordinary resurgence, surpassing pre-pandemic levels and setting new records. In 2022, the country welcomed over 28.4 million tourists, and by 2023, this number had increased to 30 million, contributing to nearly 70 million overnight stays. This influx has significantly boosted the tourism sector’s contribution to the nation’s GDP, now accounting for almost 16%, the third highest in the European Union. Revenue per Available Room (RevPAR) exceeded 2019 figures, reaching €56 in 2023, reflecting a robust 14% growth.

Portugal’s appeal is fueled by its rich cultural heritage, stunning landscapes, and renowned tourist destinations. The country’s hotel market is evolving, with a shift towards higher-end accommodations, particularly 4 and 5-star hotels. This shift is evidenced by the introduction of luxury brands such as W Algarve, demonstrating international investors’ and brands’ growing interest in Portugal.

Looking ahead, the hospitality sector remains optimistic, with over 11,000 new rooms under construction or in planning stages. Lisbon, in particular, is experiencing significant growth, with a 14.8% increase in room supply, driven by over 4,600 rooms in development. Despite the increased supply, the market has absorbed this growth without negatively impacting demand, particularly in the luxury segment.

Hotel Investment and Market Structure

Investment in Portugal’s hotel market has surged, with 2022 seeing a record-breaking €1.2 billion in transactions, double the amount from 2019. The momentum continued into 2023, with significant quarterly increases, notably a 60% year-on-year growth in Q2. This influx of investment, particularly from cross-border deals, underscores the strong interest in Portugal’s hotel sector. A notable transaction was the acquisition of 18 hotels by Davidson Kempner, Highgate, and Kronos, reflecting confidence in the market’s potential.

Lisbon remains a focal point for international investors, with the city’s hotel market structure evolving rapidly. The Lisbon region alone contributes 27.5% of the country’s total room supply, with significant growth in upscale and luxury segments. New developments, including the Andaz Lisbon and Six Senses Lisbon, are set to enhance the city’s hotel landscape.

Future Prospects

Portugal’s tourism strategy has exceeded expectations, with 2022 figures surpassing the anticipated growth rates. The country’s strong performance in tourism, coupled with continued investment and development, positions it for further growth in 2024. With a favorable climate, cost-effective living, and strong air links, Portugal is poised to maintain its status as a leading European destination for both tourists and investors.

Nuno Fazenda, the Secretary of State for Tourism, Trade, and Services, remarked on the sector’s success: “2023 was indeed a very positive year for the country’s tourism, a record-breaking year, the best year in the history of tourism in Portugal. Portugal’s tourism will experience further growth in 2024.” The outlook for Portugal’s hotel market in 2024 is bright, with continued growth and expansion anticipated across the sector.