As it does every year, Worx Real Estate Consultants is anticipating the launch of WMarket 2023-2024, the annual publication that analyses the behaviour of the different commercial real estate sectors in Portugal over the past year, with a summary of the main conclusions and trends for the current year.
In 2023, Portugal attracted more than 1.606 billion in commercial real estate investment, which nevertheless represented a drop of 45% on the previous year. The hotel sector attracted the largest volume of investment with 640 million euros, representing 40 per cent of the total volume.
Although it was one of the most resilient sectors, along with retail, the hotel sector was not immune to the context of uncertainty, showing a decrease of 30 per cent compared to the previous year.
With regard to the main transactions of the year, it is important to emphasise the role of Arrow Global as the main buyer, responsible for the biggest deals of the year, such as Dom Pedro hotel portfolio for 250 million euros, Palmares Ocean Living and Hilton Vilamoura.
The sector’s attractiveness was clearly boosted, as in previous years, by the excellent operating results of tourism in Portugal, which surpassed all previous records in terms of both demand for overnight stays and revenue.
In fact, Portugal reached more than 77 million overnight stays and 30 million guests in 2023, an increase of more than 10 per cent on the previous year.
In this context, the North region stood out with the biggest increase in the number of overnight stays, followed by the Lisbon Metropolitan Area.
With regard to the main inbound markets, United Kingdom continued to represent the main international market with 17 per cent of overnight stays, followed by Germany and Spain.
Reflecting on operational performance, tourist accommodations generated more than 6 billion in total revenue in 2023 – the highest value ever recorded – which translates into a 20 per cent increase on the previous year and a 40 per cent increase on the pre-pandemic period.
It should be noted that with regard to the occupancy rate, while in 2022 it was still below the pre-pandemic figures, the organisation of World Youth Days will have boosted its growth by 9% compared to the previous year, setting it at 66% in 2023. Even so, it’s important to emphasise that, despite the growth in the occupancy rate over the last year, in Lisbon and Porto it is still below pre-pandemic levels.
Following the same trend, the average price per room increased by 9 per cent last year, standing at €113, which resulted in an even more significant growth (15 per cent) in the average revenue per room (RevPAR) to €64.8.
In a regional context, revenue results were particularly positive in the autonomous regions of Madeira and Azores, with an annual increase of 22% and 19% respectively in RevPAR, representing an increase of around 50% to 60% compared to 2019. Compared to 2022, the regions of Lisbon and the North also saw increases of around 19% and 17% respectively.
At the municipal level, Lisbon had an average price of around €146, which combined with an occupancy rate of 72% would have resulted in an average revenue per room of €105, an increase of 21%. In this context, three-star hotels saw the biggest increase in RevPAR, due to the greater increase in the rate per room over the last year. Compared to the pre-pandemic period, five-star hotels saw the biggest increase in room rates, which totalled 246 € last year.
In terms of supply, Portugal has estimated that 56 hotel establishments will open in 2022, representing an increase of more than 3,000 rooms on the market. Over the next two years, a total of 120 new projects are expected, which should translate into an increase of 12,000 accommodation units across the country, with the northern region accounting for more than a third of this new supply. Among the most awaited openings this year, are included the debut of the Andaz (Hyatt group) and The Standard brands in Lisbon, as well as The Social Hub Porto Bonjardim project and The Lince Santa Clara Historic Hotel in Porto.
As for the outlook for this year, tourism is expected to maintain the positive performance it showed last year, although the growth is limited by high inflation, above 2%, which should continue to affect families’ disposable income for tourism and leisure. As such, and taking into account the multiplier effect of World Youth Day last year, it is not expected that demand will grow, but is expected that the number of overnight stays stabilise and there may even be a slight drop in occupancy rates as a result of new hotels entering the market.
Published on 1st March 2024.
