Tourism – A Driver of Portugal’s Economy
Portugal has been enjoying a sudden heavy influx of tourists after two years of pandemic in 2020 and 2021 curtailed travel with restrictions and constraints. The Bank of Portugal stated on 20 June in its bulletin that judging from figures for April and May, and booking numbers for this summer, Portugal will probably exceed the numbers of tourists seen in 2019, which had been a record year with around 27 million visitors.
Text: Chris Graeme Photos: Joaquim Morgado
The Bank of Portugal projects that by December 2022 Portugal will garner around 104.2% of the tourism revenues it had in 2019. In other words, Portugal will be the first country out of all its competitors in Southern Europe (Spain, Italy and Greece) to exceed the metrics that it achieved in that record year.
But it is no longer simply about the numbers of tourists, but rather the revenues that they bring in as Portugal continues to focus on quality and not just quantity; working on increasing the average spend each tourist brings to the country.
“As we know Portugal has an evident limitation on the numbers of tourists it can accommodate, so rather than just receiving more tourists, we want to welcome those tourists that spend more, stay longer, and seek added value in tourism services”, said the Secretary of State for Tourism, Rita Marques, on Tuesday at a lunch organised by the International Club of Portugal (ICPT).
Since March and April 2022, Portugal exceeded the tourism revenues seen in 2019, so that the sector is enjoying an unparalleled and “punchy” recovery which has given the industry a very positive competitive hand vis-a-vis competitors (Spain, Italy and Greece), with the ambition to get to the end of 2022 with the same result as 2019 or slightly above.
But while upbeat about the industry and Bank of Portugal forecasts for 2022, Rita Marques has bee more cautious in the Portuguese press, and has pointed out that the “bank balances of our companies are rather low” and “we need several years to recover the revenues we lost during the pandemic”.
Rita Marques has been reported in the Portuguese press as viewing tourism in Portugal in 2022 with “some moderate optimism”, but has told other publications that she thinks that revenues will “fall short of those achieved in 2019”.
Nevertheless, she stresses that a sustained growth in bookings “has been felt which is important for the Portuguese market”.
Rita Marques also states that if the months of April and May are anything to go by “2022 kicked off with some “interesting and positive perspectives” which leads us to believe that we will have a 2022 which is better than the ones we had in 2020 and 2021”.
This “cautious optimism” is a view shared by the President of Portugal’s Tourism Board Turismso de Portugal, Luís Araújo ,who recently stated in interviews: “We’re on the right track because there’s a huge demand for the destination (Portugal), there’s growth in the level of airline tickets bought, and an expressive number of accommodation bookings in all regions of the country”.
Luís Araújo also has pointed out: “We have still not totally freed ourselves from the Covid restrictions that we had” and “it is important to lower the barriers and get travel back to the normal we had before the pandemic, particularly the recognition of our certificates from countries like the United States and Canada”. And argues: “if this work to get our certificates accepted has worked, we’ll have a good year for tourism”.
A well-defined strategy
Rita Marques says that the Portuguese government has a very well-defined and mapped out strategy for Portugal’s tourism sector which in a public-private partnership is considered a case study and a success.
“Portugal’s tourism sector has managed to design a public-private policy over the years that meets the interests of private companies and stakeholders, and which has served for the re-energisation and revitalisation of the public sector”.
In a vey clear competitive agenda which was designed in 2017, and which resulted in a process which was largely embraced by stakeholders, an ambitious roadmap has been drawn up by the Ministry of the Economy to net revenues of €27Bn by 2027.
“The entire sector is aligned with the government towards this ambition, and the sector clearly knows that we are working to achieve these revenues after achieving €18Bn in 2019,” said the Secretary of State for Tourism.
Lisbon airport — the elephant in the room
However, the situation for Portuguese tourism in 2022, as it enters the peak summer months, is that the sector is “moving forward with a slight limp” hampered by the “elephant in the room” – the lack of a decision over the location of a new international airport for Lisbon that is fit-for-purpose to take the huge influx of tourists and process them through the system without huge queues and endless delays because of overcapacity and lack of slots.
That is not going to be an easy task. National airports are going to be reinforced with 238 police agents from both the PSP and SEF forces during the summer months – of these 168 will be PSP agents who are “still completing their training courses in frontier controls. They will be supervised by SEF counterparts”, says the government after weeks of chaos in May and early June at Lisbon airport due to a lack of staff.
The end of May saw scenes reminiscent of a third world country as thousands of international arrivals descended on Lisbon airport while SEF inspectors carried out what they called a “plenary meeting’.
The result was an almost full day of passport control bottlenecks, stress and misery.
The plenary meeting (called because SEF claims to have been kept in the dark over hierarchical plans for its ‘extinction’) coincided with the time the airport started to receive the major flux of incoming flights. There was no coincidence at play in the opinion of this publication; the meeting had been strategically planned to show airport failings for what they are.
And worse could soon be on the horizon as national carrier TAP airline pilots threaten, through their unions, to strike over pay cuts that were, they say, unilaterally decided by the airline’s executive commission to appease Brussels in exchange for the Government being allowed to lend and/or grant up to €3Bn to keep the company in the air.
A path to growth
In order grow to achieve this level of revenues Portuguese government ambitions, the Ministry of the Economy has traced out three paths which are complementary and interlink developmental axes and actions to achieve the €27Bn target.
These axes fall under the umbrella of a programme called Reactivate Tourism Plan/Build the Future which to date has spent some €2.1Bn out of a total budget worth €6Bn.
Rita Marques said that it was through this plan, which was launched in May 2021, that the Government hoped to meet the magic figure of €27Bn by 2027. The components of the plan cover specific areas such as ‘supporting companies’, ‘encouraging safety and security’, ‘generating business’ and ‘building the future’.
Rita Marques also announced that the Ministry of the Economy is preparing what she called ‘a Public Dashboard’ to show the general public and stakeholders in the sector what has already been achieved, and the programmes, initiatives and campaigns that are to be launched over time.
“By June, we will launch an internal control system that will show all of the stakeholders in the sector what we’ve done and what there is still to do”, said the Secretary of State for Tourism.
Of the €6.11,25Bn total investment, €4.075Bn will be provided through Portugal’s new development bank Banco Português do Fomento (itself with a suitcase of compliance problems which do not inspire confidence) which will channel €3Bn of support funding to companies with a view to preserving jobs which the minister herself admitted in 2021 on Sky News that Portugal had problems securing, needing between 15,000-20,000 staff.
In terms of other investment mobilised for the entire value chain in the tourism sector, the government has earmarked €2.8Bn for tourism developments, local accommodation, car rental companies, travel agencies, tourist entertainment, and the hotel, catering and restaurant segments, sectors which as a whole represent some 138,000 companies.
Creating experiences
Rita Marques highlights a second pillar of the Government’s policy, which has to do with enhancing the overall tourism experience that visitors enjoy and is vital to keeping Portugal competitive against its peers in Europe.
“We are working with companies and airlines to show that our portfolio of infrastructures and airports is “capable and efficient”, she added, pointing out that passenger numbers into Madeira were 25% above visitor numbers in 2019.
“Our visitors need to know that they don’t have to fly into Lisbon (probably worth communicating), we have other airports, and so this diversification of tourist flows throughout Portugal is a major priority,” she said.
The third pillar of its tourism policy has to do with “adding value”, which is why the government is working hard to “upgrade” the level of services provision in order to ensure that the average spend will increase substantially over time.
“Portugal is no longer seen as a cheap destination. We are now the country which has the second highest average spend per tourist in Europe, and we compare very well with our competitors with double the average revenues of Greece”, she says giving one example.
“Obviously, we’ve had two difficult years, and we’ve been focusing on preserving our brand over these years, so that as soon as the recovery came we would be on the front foot,” added the Secretary of State for Tourism.
Promoting off-season tourism
Rita Marques also said the government would need to review legislation to accommodate and facilitate new trends in tourism that would be vital to attract tourists in the off-season periods, particularly when Portugal has so much to offer, not just sun, sea and beaches.
The Secretary of State says that in order to combat the seasonal nature of tourism in Portugal such off-season activities need to be explored and promoted better in overseas markets.
“We are exploring and promoting health and wellness tourism, spiritual retreats tourism, and nature, cycling, hiking and adventure tourism. In 2019 we were the country in the Southern Europe which had suffered the least problems associated with low tourist numbers in off-peak months”, she said.
Rita Marques pointed out that Portugal was a pioneer in terms of health and safety and tourism, as the first country to launch its ‘Clean and Safe’ campaign to instil greater confidence as a safe country to visit thanks to the success of this sanitary initiative, and this was important in safeguarding ‘Brand Portugal’ as an open, safe, sustainable, and responsive destination to visit.
This legislation is also necessary for tourism developments and communities, particularly resorts and the development of businesses linked to health and wellness such as senior residences, as well as the latest trend for luxury camping or ‘glamping’ as it is more popularly known.
“There is a legal vacuum because of current legislation, which has made it impossible for us to capitalise on some new trends, and we are working so that these laws can be added within the national framework because legislation should never inhibit us from taking steps to take advantage of these trends”, said Rita Marques.
Staff shortages
Another perennial problem has been dealing with the seasonal nature of the industry when staff are taken on during the peak busy months on short term contracts, or even not on contracts at all in some cases, and then released when tourist numbers dwindle.
According to CNN Portugal, the average salary in tourism (hotels and restaurants) in the busy tourist region of the Algarve is only €881/month.
The problem of a lack of staff to provide a decent service in Portugal’s four and five-star hotels, its guest houses, bars, clubs and restaurants has been blamed on the Covid-19 pandemic, when many staff who were laid off, used the pandemic period to retrain for jobs in other sectors, or chose simply to leave the sector altogether.
But there are said to be concrete reasons why they left. Poor pay and poor working conditions – an argument that both the Secretary of State for Tourism and the President of the Portuguese Tourism Confederation, Francisco Calheiros, representing companies linked to the tourism sector in Portugal, roundly refute.
In a damning report, the Portuguese Hotel Association (AHP) estimates that it needs 15,000 more employees for the sector to fill its staff vacancies. And even though there are job vacancies, there is a lack of staff to fill them. But not all hotel groups are in the same boat. “We’re starting the season with the staff that we need. We’ve got 45 staff vacancies in all area where we operate”, says Bernardo Trindade, CEO of the PortoBay group who is also president of the AHP.
So if there are the jobs to fill, why is no-one buying? Hoteliers are unanimous in the answer: the issue lies in the hours in a sector which works 24/7/365 rather than the wages which according to several studies are not as bad a painted when taking into consideration the amount of perks that good hotel groups offer.
“All the hotel groups are paying better and this is an issue we’ve been assertive to address. But we have a feeling that this is not enough,” says Berardo Trindade.
Some hotels are using incentive packages to lure and retain staff such as productivity bonuses, heath insurance, and discounts in partner services.
“We already have a package of conditions, including salaries and additional bonuses and benefits such as health insurance and discounts which as a rule are above the average offered by the sector and we think we’ll be able to attract staff”, said Gonçalo Rebelo de Almeida, the director of the Vila Galé Group, the second largest in Portugal in a recent interview.
As to the question of long hours, Bernardo Trindade said, “We’re open to being more careful when drawing up staff work rosters, dividing up the weekends more equitably among the entire work force”.
Portugal’s tourism workers unions certainly agree on this. “The main problem continues to be the unpredictable nature of the working hours”, said Francisco Figueiredo, head of Portugal’s hotel, restaurant and tourism industry union FESAHT.
He insists that the overwhelming majority of staff in hotels and catering continue to work for the minimum national salary, and even when new jobs pay better, those who are already in contracts don’t get more.
“There’s no negotiating on this and the breach is unbridgeable. Many senior management structures don’t offer career progression or incentives for older staff”.
At the lunch Rita Marques countered these kinds of arguments over poorly paid staff in the sector by saying there has been an average increase over six years of 23% on minimum salaries in Portugal. “The tourism sector had two bad years, but we have always worked hard alongside business leaders to pay more”.
“But there are other privileges, apart from salaries, that should be taken into account in the incentive package when hiring, maintaining and retaining this talent, and the sector needs to pay this some attention since staff in the sector are usually working at weekends and periods when most people are on holiday”, she adds.
The President of the Portuguese Tourism Confederation Francisco Calheiros representing companies linked to the tourism sector in Portugal insisted at the ICPT lunch in response to the accusation from a politician from the conservative CDS party, Miguel Mattos Chaves, that “hotels should stop complaining they don’t have staff when they pay badly and always have” and “if they paid better they’d have more staff” pointed out: “we can’t seem to resolve the problem of a lack of manpower, the situation over the new airport, neither the problem of the borders and immigration agency system, or the recapitalisation of companies in the sector whichever ministry seems to be involved.
“Tourism does not pay badly. Tourism according to the latest study from Ranstad is one out of five sectors that are the most attractive to work in, in Portugal. The question is simple. With only a 5% unemployment rate in Portugal – and the salaries are attractive — the problem is that there aren’t enough people in the market to do the jobs in tourism, industry or the services sector, and this problem is being faced even outside Portugal since airports in London can’t find staff to satisfy the demand for flights,” said Francisco Calheiros.
Tourist numbers — can Portugal’s airports cope?
And then there is the issue of processing passenger numbers that pass through Portugal’s main five airports: Gago Coutinho, Faro in the Algarve, Sá Carneiro, Porto, Humberto Delgado, Lisbon, Cristiano Ronaldo, Funchal, and Ponta Delgada, the Azores.
“We have to be able to have enough staff to deal with the kind of numbers we had in 2019 (60 million visitors passed through Portugal’s airports in 2019), many of them in transit, and we know that 50% of those passengers who disembarked did so at Lisbon International Airport (30 million Pax), and we have to continue working so that these passengers arrive in Portugal, but not only in the peak high season months of July, August, and September”, concludes the Secretary of State for Tourism, Rita Marques.