Portugal among the most attractive European countries to invest in hotels

Portugal is the seventh most attractive European country in which to invest in hotels according to the ‘2024 European Hotel Investor Intentions Survey’ published by the international real estate consultants CBRE.

It is — surprisingly — the first time that Portugal appears in the ranking “showing great potential both in terms of the diversity of destinations offered (short city-breaks in Lisbon and Porto; beaches in the Algarve and Comporta) and in terms of quality of service.

Portugal was behind Spain, UK, Italy, France, Greece, and the Netherlands in that order, but ahead of Ireland (8), Germany (9), and Sweden (10).

Nevertheless, Portugal closed 2023 with another 67 new hotels, according to the “Real Estate Market Overview”, prepared by Savills Portugal, in a year that it considers being “an unprecedented year.

And by the end of 2024, 130 new hotels are scheduled to open, with a total of 11,200 rooms, a pipeline that has been successively revised downward in recent years.

CBRE’s 2024 European Hotel Investor Intentions Survey delves into the responses of Europe-based investors, exploring their investment appetite in hotel assets and their preferred strategies and markets for 2024.

Previously, the UK held the leading position as an investment destination. However, the latest survey reveals that Spain has now taken over this position. The increasing interest in Spain is further evident at a city level, with Madrid overtaking Paris to secure the second spot behind London in the 2024 survey.

The key findings of the survey revealed that Investors express confidence in investing in hotel assets, with over 90% of respondents expecting to maintain or increase hotel investments in 2024. Hotels are expected to experience a smaller discount compared to other real estate sectors, owing to their resilient trading performance

More than any other single issue, the cost of capital stands out as the foremost challenge for hotel investors in 2024. This is primarily driven by interest rates, which have risen to counter inflation. Labour costs, another inflationary concern, rank as the second most significant issue. Additionally, over 80% of respondents perceive geopolitics as a factor that will influence investing in Europe.

Value-add strategies dominate investor preferences, with repositioning opportunities being the most sought-after. Unaffiliated hotels are in demand, with vacant possession being a priority for 36% of respondents. Among European investors, soft brands surpass hotels directly affiliated with the global brand family, while full-service hotels remain popular

While demand for resorts remains strong, hotels located in central business districts (CBD) now lead in terms of popularity. Gateway cities continue to dominate as the preferred destinations. London retained its top spot while Madrid has increased in popularity. Athens has entered the top 10, serving as evidence of Greece’s strong positioning in the market over the past five years.

Pic: © The One Palácio da Anunciada, Lisbon, Photo: Roger Mendez