The current and future state of tourism in Portugal

Tourism represents nearly 20% of Portugal’s GDP. It grew its revenues by 60% in four years from €11Bn per year to €18.4 between 2016-2019.  But now the industry is at a standstill with hopes of a late summer recovery fading. Has Covid-19 broken a golden run of luck forever, or can it recover to those pre-2020 record years?

In an event organised by the American Club of Lisbon and sponsored by the Luso-American Foundation (FLAD), Grupo Bel and American international school CAISL and partnered by the Sheraton Lisboa Hotel & Spa and Immersa Global, five expert leaders give their opinions on the current and future state of tourism in Portugal.  

By Chris Graeme 

Luís Araujo, President of Turismo de Portugal looks back in amazement at the past few years enjoyed by Portugal’s tourism sector. Record numbers of tourists and  the lowest seasonality ever in 2019, and even off the beaten track areas that had traditionally attracted less tourists were growing visitor numbers more than ever.

“In January and February we were riding the crest of the wave, growing double digits, with record revenues from tourists and visitors in 2019 of 27 million, and then suddenly we were hit by the biggest wave in the world, which knocked us for six – even bigger than the Nazaré surfing wave – Covid-19,” says Araújo drawing a parallel to record-breaking surfing waves on Portugal’s Silver Coast

“When everyone calls it a health crisis or an economic crisis, we say this is a crisis of trust and of whether people have enough confidence to leave their homes and travel. You can only build trust with three very simple things: transparency (compliance), responsibility – currently 20,000 establishments from Airbnb to hotels and golf courses to travel agencies have to obey very clear and specific rules – and experience.

Clean & Safe

“Responsibility also comes from the people who visit Portugal, so with this new Safe & Clean platform visitors can evaluate any establishment in Portugal by pressing a green, yellow or red button. If they press the red, we will carry out an audit immediately,” said Luís Araújo.

The tourism chief stresses that Portugal is prepared to welcome visitors and has been giving training to over 60,000 people up and down the county on a digital basis in sanitary measures over the past four months, and this shows how eager companies in the tourism sector are to welcome tourists again.

The third factor in building trust is the experience. “We don’t want anyone coming to Portugal to have the same experience they had previously. For us experience means a seamless experience, from mobility to communications, from information to payments. For this it has set up an innovation centre which works with startups and has just launched Fostering Innovation in Tourism to find new solutions in Portugal to creating a seamless experience for people from other countries.

Clean and Safe – how does it work in remote areas?       

Sheree M. Mitchell, President and Founder of Immersa Global – an upscale destination management company which specialises in curating exclusive group travel programmes and was recently awarded the ‘Most Unique Culinary Tour Operator of the Year’ by Lux Magazine – who co-hosted the event with ACL President Patrick Siegler-Lathrop, started the debate by asking how the Government’s  Clean and Safe programme actually worked in practice.

“We’re hearing a lot about the campaign and the concept is wonderful, but we need to know how it works so we’re able to provide that information to potential travel consumers in the near future,” she said.

Mitchell also wanted to know how the other tourism products in the more remote regions of Portugal such as villas and farm homes were reacting to and following the Clean and Safe campaign, and asked if other travellers were being respectful to the new rules. Equally, with so much stress and uncertainty around, she asked if it actually is “fun or stressful to travel in Portugal at the moment?”

“The most important question for us is if Portugal is actually ready to receive overseas visitors?” says Mitchell, particularly for the kind of customised luxury packages that her firm Immersa Global organises for discerning affluent Americans who want a seamless no-worries Portugal travel experience.

From her preliminary observations on a 14-day road tip across the country, Mitchell has noticed touring the country that Portuguese hospitality providers are still managing to provide an upscale luxury service, while observing ‘safe and clean’ and social distancing rules. For example some hotels are providing masks and hand sanitisers as welcome gifts while many restaurants are using QR codes instead of physical menus.

Will the airline industry ever be the same?

Gavin Eccles, Aviation and Tourism expert and lecturer at the university Lusófona, discussed the challenges facing the airline industry and stated, “we are in this not knowing when the industry will be back”.

“We have, over the past 15 years, had multiple events which brought the aviation industry to the ground: SARS in Asia which took five months to recover from, September 11 which took six months for the industry to recover. With the Global Crisis of 2007-2008 it took 10 months for the industry to recover, but the challenge with this crisis is that we still don’t know how long the virus will be around and therefore how long recovery will take,” he said.

Eccles says that ‘price dumping’ isn’t happening, and is unlikely to in the future, but as the industry is not seeing so many passengers and fewer tickets are being sold, by default yield is dropping along with revenues.

“It’s about confidence and telling people that it is ok to start travelling. Portugal is largely centred around two models: the low cost point-to-point flying model serving multiple cities. Airlines like easyJet and Ryanair can get their schedules back up and running quickly,” says Eccles.

“Obviously, it’s unfortunate that Ireland and the UK have put Portugal out of the corridor and I am sure that will change very soon, but the airlines like Aer Lingus, easyJet and Ryanair were all ready to ramp up their schedules and were still flying. The Algarve and Madeira, where there has been a lot of low-cost development, can quickly see penetration with capacity bouncing back quickly,” the airline industry expert added.

The other model, more favoured by large legacy airlines, is ‘hub and spoke’ so for TAP, given the Covid-19 situation in its two biggest passenger emissor markets, the US and Brazil, things are not so easy.

“We have to be honest, legacy airlines like TAP, Lufthansa, KLM Air France, American Airlines and British Airways have not been able to ramp up services, flights and passenger numbers like the low costs because they are reliant on passenger traffic on different legs of the journey.”

The challenge for hub airports is when can airlines start bringing two legs of a journey back together again, because while one one leg of the journey is operating, another isn’t and these airlines are having to compete with the point-to-point low costs.

Foe example, one percent of BA’s top 20 routes – the US, China and the Far East, for example, represent 56% of its total revenue and it is these routes that are being most affected by Covid-19.

Hotels: hygiene and the human touch

Thierry Henrot, General Manger of Sheraton Lisboa Hotel & Spa, discussed how luxury and high-touch hotels were responding to the ‘new normal’ saying that the pandemic threw up great challenges on how hotels could provide great memories for their guests.

Henrot said cleaning and sanitation were now the top priorities when it comes to selecting and staying in a hotel.

“Months back, guests would ask about check-out times, restaurant offerings and spa treatments, but are now more concerned about how rooms are cleaned in what has become a huge shift in our day-to-day business,” he explained.

Henrot points out that all the hotel brands had to come up with new protocols “in flash time” based on what was being followed in hospitals and guidelines from health experts.

“Rigor and constancy of these protocols is key, and the getting the balance right is also very crucial to ensure that we are not acting like a hospital,” said the hotel manager.

Social distancing has been another challenge. “Hoteliers have to find new ways of delivering that customer experience in a hygienic yet human way.”

Space too, he says, has become part of the definition of luxury, meaning maintaining personal space and enjoying the sense of having space and privacy which has to become part of every product and service offered by hotels.

Another aspect is the regulation distancing measurements that have to be put in place in hotel public areas and other parts of the establishment, and which have to be implemented in “very subtle but strict ways.”

“The ‘Clean and Safe’ programme has helped a lot to ensure that we know how to communicate and discipline the measurements for personal space and see they are respected,” he said.

Mário Chesa, NOVA Hospitality & Tourism Platform has been looking at ways of preparing the next generation of tourism leaders in challenging times.

By creating a number of virtual labs at NOVA, it identified some of the factors that were transforming the industry, digital transformation being one of them, the other being sustainability, heritage, nutrition and marketing.

“We at the university are on the one hand trying to develop programmes through an interdisciplinary platform with other partners to address these issues on executive education courses, but also make knowledge available for partners, both public entities and private entities, and leverage different departments in the university who may not be business or marketing experts but can tap expertise on heritage and history,” says Chesa.

The tourism and hospitality industry is characterised by a panorama of very good schools, that give very technical and operational education, an example being the 12 Turismo de Portugal schools.

However, he says there are recurrent themes in the industry where people should be knowledgeable, but in fact aren’t. A case in point is sustainability in which a hotel manager or hospitality leader must be knowledgable about sustainability and often aren’t.

“We are partnering up with Turismo de Portugal to examine specific sustainability projects that they want us to look into as a university in terms of research, because we can help build a carbon neutral footprint for the hotel industry in Portugal,” he concluded.