Portugal’s tourism industry — surviving if not thriving

When in October 2019 Rita Marques was offered the outwardly glamorous post of what is perhaps one of the Portuguese government’s most sought after top jobs, secretary of State for tourism, it must have been a dream come true.

Hard work, yes, long hours, inevitable, but travel up and down the country and overseas, to the Portuguese island destinations, travel awards, boutique hotels and fine dining would all come with the job and be one of the perks of heading one of the most important positions in the government, laden with responsibility since tourism is a key pillar of Portugal’s economy, worth a staggering €18.4Bn in 2019 – a record year.
In terms of demand, the figures were impressive: over 70 million hotel night bookings (+4.6% on 2018) and a breathtaking 27 million guests (almost three times the entire population of Portugal) and +7.9% on the previous year.
There was also galloping growth (+8.1%) in national guests compared to overseas holidaymakers (+7.8%), although foreigners were responsible for 71.2% of take-up compared to 28.8% nationals.
That year, revenues from overseas visitors stood at €18.4Bn — in fact revenues for that and the two preceding years 2017 and 2018 almost amounted to the €76Bn bailout Portugal had received from the troika of international lenders back in 2011.
It was all going swimmingly. By January 2020 what could possibly go wrong? Granted, these numbers were tall orders to live up to, certainly following in the footsteps of her predecessor Ana Mendes Godinho who took much of the well-deserved glory.
But it was a dream job to crown a fast track career for the engineer who months before had headed Portugal Ventures, the government venture capital outfit with an emphasis on tourism-leaning startups.
But sometimes a chalice is poisoned and suddenly a dream job can turned into a nightmare as Covid-19 all but wiped out one of the biggest drivers of Portugal’s economy.
And you suddenly go from being everybody’s friend to everybody’s scapegoat. This was revealed in front of a room full of business leaders at a luncheon organised by the prestigious International Club of Portugal (ICPT) in June when the ex-president of the Portuguese travel agents association APAVT, Vitor Felipe, founder of Travel Quality (TQ) told the minister just how annoyed he and his members were at the government’s support or lack it throughout the pandemic which he said would force many independent agencies to close.
And the problem for the secretary of state for tourism is that the sector is not just about hotels and flights. It is about a entire chain of segments and sub-segments within the sector containing countless companies involved in goods and services linked to tourism, both directly and indirectly, which employ tens of thousands of people, many of them not highly qualified and who would find it hard to find jobs in other areas.
It’s the hire car companies, the swimming pool cleaners, the bar and restaurant owners, the wedding organisers, the summer open-air concert promoters, the laundries that deal with hotel sheets and towels, and even down to the man who cheerfully sells cream-filled doughnuts on the normally packed Algarve beaches.
Being blamed, taking the flack and facing backlashes cannot be easy, even for the thickest of skins. One can only imagine it would be an easier job being Josef Stalin’s private secretary. A thankless task then.

On the same page

But then Rita Marques has an amazing calm and collected detachment and genuinely doesn’t seem at all phased by the situation which, after all, is beyond her control.
“We have always been on the same page with our partners in tourism,” she says matter-of-fact.
“As the secretary of State for Tourism, no matter what the circumstances are, our department cares for the tourism sector and we want what is best for its businesses. We share the same ambitions that most associations within the sector have,” she says.
Rita Marques admits the Covid-19 pandemic is a “never-ending story” but despite the difficult situation, she does have a good team, massive support from the Minister of the Economy, Pedro Siza Vieira, from other secretaries of State within the government, and the minister of Foreign Affairs, Augusto Santos Silva and minister of Internal Affairs, Eduardo Cabrita, sharing “a spirit of resilience and working together” to deal with issues as they have arisen.
The secretary of State says she has felt the support and cooperation of the various sector associations, including public entities such as the tourism bureaux Turismo de Portugal, Turismo do Porto e Norte de Portugal and Turismo do Algarve, the Portuguese Hotel Association (AHP), the Portuguese Travel and Tourism Agencies Association (APAVT), the Portuguese Association of Restaurants, Hotels and Tourism (APHORT) and the Portuguese Association of Bars, Discos and Entertainment Establishments (APBDA) to name just a few of the many associations that make up an industry whose members have been seriously affected by the sanitary measures and restrictions set up to control the pandemic.
“We try and tackle the situations in a very precise way, calling companies and associations to get feedback in order to improve measures. Of course, we are well aware that the financial support and incentives that the government has provided were relevant, but we have to recognise that the sector has survived, companies have had to go to the bank to get stays on loans and even the staff working in the industry have made sacrifices to safeguard their jobs,” says Rita Marques.
“After 18 months now of the pandemic I feel the sector is united, cohesive and eager to start working on fully opening up our tourism sector,” she said after a last year’s disaster in which companies linked to the sector lost an estimated €1Bn in revenues.

A €3Bn lifebuoy

To help mitigate these losses the government recently announced public funding of around €3Bn as the main component of its Plan to Reactivate Tourism|Build the Future – Supporting Companies and this includes facilities to capitalise sector companies, reschedule bank loans and repayments on loans, extending the grace periods on the repayments on existing bank lending in a support package that will be transversal across the sector.
Of course, the issue this year was a second lockdown between 13 January and 31 March, a back-track on the phased reopening of the wider food and beverage outlet segments in late June as Covid numbers rose in Lisbon and Albufeira, affecting both opening hours and numbers in shops, restaurants, cafés and bars, and the UK’s decision to pull Portugal off its green list on 6 June after adding it on 17 May, resulting in thousands of tourists having to either cancel their holidays in the Algarve or rush home to beat a quarantine deadline. All this begged the question of just how “fully open” Portugal’s tourism sector was.
And the situation got more difficult when Germany too decided on 25 June to join the UK in pulling Portugal off its green list, But Air France, on he other hand, upped its flights to Portugal by 25% and from June 16 US visitors were able to travel to Portugal.
And while the President of the Portuguese Hotel Association (AHP) Raul Martins called the UK government’s decision an “unpleasant surprise” hoteliers in the Algarve had been getting cancelled bookings from Portuguese tourists from Lisbon after restrictions on movement were put in place by the government, with João Soares of the Portuguese Hotel Association (AHP) in the Algarve saying: “this news is a disaster since we’ve already got restrictions from the UK market and others.”
Some in the sector feel that with so many airline routes still closed, and the super-contagious Indian Delta variant spreading, Portugal may be facing a second lost summer season. Rita Marques disagrees.
“Nothing is lost. The assets we have that have made Portugal internationally recognised as the best destination in the world, the best destination in Europe (World Travel Awards) are still here and we need to reactivate what we have,” says Rita Marques, pointing out that the estimates for 2021 tourism figures are higher than they had been in 2020” remarks the secretary of State for Tourism, pointing to improvements for Q3 and Q4.
Figures from the National Statistics Institute (INE) and the Bank of Portugal (BoP) for March revealed 283,000 guests and 636,000 nights (down 59% and 66.5% respectively, 460,000 guests and 946,000 nights for April (down 80.3% and -84.2% on April 2019. The preliminary estimates suggest that May will be better in terms of bookings than April.
In May numbers did improve with 989,287 hotel guests and 2 million hotel nights, numbers that showed an encouraging 700% rise on the same period in 2020 and the numbers for June and July were also said to be encouraging, even if on the back of local tourism rather than an influx of overseas visitors. Nevertheless, to date tourism in Portugal has only managed 25% of the optimistic €9.3Bn target forecast by the Government this year.
Still, despite the disappointing news that Covid-19 numbers had risen again in the capital Lisbon and in Albufeira in the Algarve, the Portuguese Government does not see temporary retroactive measures as a major stumbling block to opening up the country’s tourism economy.
For starters, at the end of May Portugal’s Minister for the Economy, Pedro Siza Vieira unveiled an ambitious plan to support the development, growth and innovation of the wider sector to 2027.
The essential tenants of the Plan to Reactivate Tourism|Build the Future were also emphasised by Rita Marques at a Lisbon business lunch organised by the International Club of Portugal in June attended by overseas diplomats who use such events to get insights into government thinking and policy.
The plan foresees an investment of €6.1Bn for the Portuguese tourism sector, with the aim of exceeding revenues of €27Bn by 2027. Given that Portugal enjoyed record years in terms of tourist numbers and revenues in 2018 (12.5 million overseas tourists and 21 million national and international tourists combined, and in 2019 (27.1 million combined), despite the Covid-19 blip and the caprices of changes in travel destination fads and fashions, the government thinks this is doable.

A four-pillar strategy

The government’s current strategy for tourism which has been temporarily modified and adapted to meet the challenges of the pandemic, was actually laid down in 2017 as part of a 10-year plan to 2027.
The updated strategy rests on four pillars: supporting companies, promoting health and hygiene safety measures, generating business and building the future.
The government made good headway in 2020 with the second tenet of the Plan to Reactivate Tourism|Build the Future – Providing Hygiene Safety through sanitary measures it developed for the tourism industry regarding hotels and guest house accommodation through its Clean & Safe campaign in 2020. Nevertheless, despite the best efforts in the world, Covid-19 numbers soared out of control by January 2021 forcing a second lockdown with the resurgence of a new, more contagious variants, the Delta variant being the latest, taking hold in Lisbon and some parts of the Algarve by June. As of August the numbers are still high.
One way of meeting the third tenet of the Plan to Reactivate Tourism|Build the Future – Generating Business is diversifying into new markets, in addition to the tried and tested UK, Ireland, Spain, Germany and the Scandinavian countries.
“We have been extremely active in long-haul markets in 2019. The American market has been growing by 20% but we have also seen growth in the Canadian and Chinese markets too,” explains Rita Marques.
“This diversification helped Portugal for several reasons. First, it helped counter a problem which had plagued Portugal’s perception overseas as just being a ‘sun, sea and beach’ destination (with some golfing holidays thrown in at the upper end of the market), which meant that when the summer season was over, the sector suffered.”
The strategy worked. By 2019 Portugal had the lowest seasonality index rate out of all the Southern European countries. “July, August and September are important months, but we work the low season not only because of golf, but also taking advantage of the long haul travel, from October to February because countries like Brazil have holidays in these months,” she says.

Valuing natural assets

A second strand to Generating Business is the strategy to diversify tourism within Portugal and in different regions and cities in the country, not just Lisbon, Porto, the Algarve and the archipelagos of Madeira and Porto Santo and the Azores.
The government invested heavily in tourism attractions through specific program run by Turismo de Portugal (Portugal’s tourism bureau) in order to meet demand. The program ‘Valorizar’ meaning to value the interior, invested, for example, in extensive wooden walkways through natural beauty spots. One are the 8 km Paiva Walkways which wind their way along the West bank of the River Paiva in Arouca, Aveiro and cut through one of the most lovely and dramatic landscapes in Portugal.
“We invested in a lot on tourist attractions in the interior of Portugal to respond to the growing demand from both national and international visitors. Since the pandemic these have proved popular attractions. Covid created new trends as people wanted to avoid heavily populated areas, and instead sought the wide open spaces of nature and the countryside. Portugal was able to capitalise on this as we had already invested in these attractions prior to the pandemic,” explains Rita Marques.
It has also meant investing in Portugal’s historic medieval and Gothic cities like Viseu, Braga, Braganza, Évora and Beja by making them more dynamic, not just in harnessing their history, but also through regional gastronomy and cultural events. This proved a spectacular success when the birthplace of the Portuguese nation state, the city of Guimarães, was European Capital of Culture in 2012.
The program Valorizar has around 800 projects that have been approved by Turismo de Portugal with non-repayable cash grants originating from direct revenues from that entity, while more than €100 million has been invested since 2018 in such projects.
Another more recent example was the inauguration this summer of the Rio de Moinhos Bikestation – a cycling hub and cycle paths covering the picturesque Serra D’Ossa in the Alentejo region in a €100,000 investment. The president of Alentejo and Ribatejo Regional Tourism, Vítor Silva said it was aimed at tourists who visit the area for a specific product, in this case cycling, so that they have a network of cycling paths and related infrastructures.

Helping companies to adapt

The government also launched the program Adaptar 2.0 which is an updated version of the initiative Adaptar 1.0 to support sector companies during last the pandemic in 2020. Aimed at micro-companies and SMEs, the programme has around €50 million to help companies and adapt and modernise their commercial establishments in terms of staff, management, suppler organisation and adapting interior spaces to the new sanitary and social distancing rules.
A way of combatting seasonality is by making Portugal a business destination for congresses, summits, conferences, company team-building incentive trips and, of course, in the realm of culture and sport by hosting international events. In fact, the government has set aside a specific fund to invest in events (€50 million for companies that put on events and €42 million in outright grants for cultural events) to attract the public to different cities.
“We do believe that the priorities are there; they have been refined, updated to take into account the current circumstances, but we now need to boost the program so that the targets that we have defined to 2027 can be achieved,” explains the minister.
Rita Marques reiterates; “our goal is by 2027 to reach the level we had set in 2017. In 2017 we had projected a tourism revenue growth rate that would achieve €27Bn by 2027 and that has not changed. The crisis may have set us back on our goal but our plan is to get to this level and if possible even exceed it,” she said.

The development bank

From the €6.1Bn investment total, the largest portion €4.0Bn is held by Portugal’s new development bank, Banco Português do Fomento which will direct €3Bn in aid to support companies with a view to fostering both productivity and jobs) and €1Bn for capitalisation, thereby meting the first of the essential tenets of the Plan to Reactivate Tourism|Build the Future – Supporting Companies.
Apart from recapitalising sector companies, this amount also includes a public guarantee to refinance and reschedule loans and extend loan repayment grace periods as well as a credit line backed by government guarantees to meet cash-flow needs, all of which aim to kick-start Portugal’s tourism sector and get struggling companies back on their feet.
The aid package is being distributed across the wider economy linked to tourism and those segments which have been most affected.
The Secretary of State says that regarding employment figures and statistics on company closures, the numbers are fairly positive. “There are clear signs that because of our joint efforts most companies and the jobs that depend of them were saved,” she says.
The fourth pillar, Building the Future, is a long term strategic one, which whilst depending a lot on what is being done in Europe regarding establishing mobility and travel through the European digital covid certificate, also has a much greater ambition to define a tourism strategy for 2030-2050 within a European context.
The Portuguese presidency of the European Council which ended at the end of June, launched this challenge and it is hoped that it will be passed by the Council.
“I have high hopes that we will be shortly able to announce a European Agenda for Tourism 2030-2050 which will continue under the Slovenian presidency that begins in July,” says Rita Marques.

The British market

The British market is the most important one in terms of tourism revenues for Portugal, with a long love affair among British tourists with the Algarve across all economic income brackets and this has been a constant for Portugal’s main holiday region since the mid-1970s.The market represented 2.5 million hotel nights in 2019.
The minister declined to be drawn into speculation that the UK, after seeing plane loads of tourists heading for the Algarve (around 30,000 from May 17), buckled under pressure from local UK tourism lobbies to “holiday at home” with a UK-wide government-backed tourism campaign launched around the same time to inspire people, particularly the young, to holiday in the UK rather than abroad.
“This is a question for the British government, but I was more surprised rather than disappointed that Portugal was removed from the green list, other EU member states were equally surprised. I was in Greece when I received the news and I was with the Greek, Spanish and Maltese tourism ministers and they were surprised since they have very low Covid numbers and were meeting all of the UK’s own standards and regulations,” says Rita Marques.
“This is not good, not only for the governments, but also the tour operators and companies. We understand that we have to look out for our citizens, but we work in a sector that relies on free mobility of people and goods, and that means the rules for opening up for all the markets need to be known, and we were surprised because at the time we had met the standards that the British government defined,” she explained at the time.

Working other markets

Overall, in terms of positioning Portugal internationally, Rita Marques says that while the UK market is very important the country, the government and its partners have been working on many other overseas markets for many years.
“We’ve never stopped working with other markets that are very dear to us and have a very strong relationship with Portugal’s Algarve and Madeira. We had been marketing them significantly even before this pandemic arose. Ten years ago, the British market was dominant in the Algarve and is still massive, but our dependence on British holidaymakers has been decreasing steadily year-after-year,” stressed Rita Marques.
However, the secretary of State stressed that this did not mean the number of nights spent in accommodation was decreasing. “The stays per night are still increasing, but the numbers of other nationalities — the French, Italian and Dutch holidaymakers are increasing at a faster rate,” the minister points out
“Ten years ago the pie chart was dominated by the UK market, today the UK slice is smaller, the pie, however, is now much bigger as we have been growing in terms of the number of nights stayed, particularly regarding other European nationalities,” she explains.
Much of Portugal’s success in attracting new overseas markets is partly down to marketing and being discovered over the past decade, and partly down to new routes being introduced by low-cost airlines such as easyJet, Ryanair and others.
“Apart from Germany, France and Italy, we have also been marketing our neighbour Spain from where these tourists come by car. All the markets, including the UK were growing until 2020, and whilst it is true that the British really do love the Algarve holiday experience and it is a perfect fit with a lot of repeat custom, but we do need to diversify,” says Rita Marques.
In June easyJet opened up a new hub at Faro airport with three dedicated aircraft based there and despite the decision by the British government. “That day, even after Portugal had been removed from the green list, eight flights arrived from the UK, so people are still coming despite the perceived risk, particularly digital nomads, not on the same scale, but relevant nevertheless”.
Also in August Ryanair announced that it would invest a further €255Bn in Portugal with new routes to Agadir, Malta and Palermo and three new additional aircraft based at Lisbon.
“The aim is to keep Portugal competitive and keep business coming in and this also means that Portugal must market itself well in its target markets,” she says.
Still, she emphasises that even in the pandemic year Portugal was recognised as the best tourism brand in Europe so “obviously we are doing something right, we’re looking forward and we will continue to spread the word and send out the correct message, showcasing the best we have to offer in terms of the competition which will be stiff in this phase of reopening up the sector”.

Reforming the sector

The Secretary of State for Tourism does not believe that the sector needs structural reforms, which is why there was no mention of this in the Government’s Recovery and Resilience Plan (RRP) given that the sector already has the investments from the Plan to Reactivate Tourism|Build the Future.
“There are those who have called for us to be part of the RPP, but I would stress that the tourism sector does not need structural reforms, our governance is adequate and our assets are extraordinary and our growth (discounting the pandemic) has been sustainable.
“Obviously we do require a specific plan to ensure the development of the sector in such a way that we can meet the targets we had set out in 2017 by 2027,” she said at the ICPT lunch in June and reiterated at the 7th Internal Tourism Forum – Come and See Portugal.

Not surviving but thriving

“Everybody is talking about the sector surviving after the pandemic, but I want to see us thriving and setting an example of how a country can develop all of its tourism assets, both town and country, beaches and Serras, lakes and rivers and in all areas: business, golf, events and congresses, sand and sea, highlands and national parks. After all we have so many assets to show for a small country and that’s why we are the only country in Europe that has launched a specific plan and budget for tourism to harness those assets and provide reasons to visit Portugal and its contrasting regions all year round,” concludes the secretary of State for Tourism, Rita Marques.