Europe -  Lisbon, Portugal

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Lisbon is one of the oldest cities in the world, predating other European capitals such as London and Rome. The city offers a large variety of cultural and architectural attractions and has the most dynamic economy in Portugal. The service sector employs more than 60% of the working population owing to the heavy concentration of service providers in the capital, public administration and the fact that Lisbon is the largest consumer centre in the country.

Over the last few years, Lisbon has become increasingly popular for leisure city breaks, owing to a year-round Mediterranean climate, its relatively low prices offering compared to other European countries and the perceived level of safety and security. In addition, Lisbon was named the World's Leading City Destination at the World Travel Awards 2018. In recent years, the city has hosted international events such as the 2014 Champions League Final; Rock in Rio, a music festival staged in Lisbon every two years; and the Web Summit, a technology conference held annually since 2009 (and will continue to be until 2028), attracting around 70,000 attendees every November, putting the city on the map as a conference destination.

The evolution of passenger movements at Lisbon Portela Airport over the last five years has been among the most impressive in Europe, with a compound annual growth rate of 12.5% between 2014 and 2018, reaching a record 29 million passengers in 2018. TAP Air Portugal recently announced two new routes from the USA from June 2019 (making a total of seven direct routes), adding direct flights to Washington D.C. and Chicago. TAP also ordered 71 new aeroplanes, which will increase passenger traffic to Portugal. To cope with growing demand, in January 2019, operator Vinci Airports agreed to provide €1.2 billion in funding for the expansion of Lisbon’s main airport and the construction of a new hub in nearby Montijo. This new airport, situated 25 km south of the city centre, is expected to begin operating in 2022. The viability and sustainability of this project are still to be established. Additionally, Lisbon is becoming an increasingly popular port of call for cruise ships and the new terminal inaugurated in November 2017 is expected to drive additional demand.

2018 data show that the positive visitation trend is continuing, albeit at a slower pace due to a decline in domestic, UK (weaker pound) and top European markets (return of Northern African markets). These declines were offset by stronger demand from the USA and Brazil, driven by new direct airline routes and the security situation in Brazil. An influx of French tourists seems to be filling the UK void, seeking the fiscal benefits of residing in Portugal (non-habitual resident status), as well as security concerns in France.

Hotels in Lisbon record high occupancy levels owing to strong and constantly growing leisure demand. Over the past 10 years, occupancy grew from the low 60s to just above 80% in 2017 before stagnating in 2018 owing to supply growth and more subdued visitor growth. Meanwhile, Lisbon’s average rate performance increased significantly over the past four years, driven by international visitors.  

Over the last five years, hotel supply in Lisbon has increased significantly, in line with the growing number of visitors. According to Turismo de Lisboa, there were 209 hotels in 2018, providing some 21,400 hotel rooms. Owing to the difficulty in finding sizeable properties with a suitable location, major international hotel brands do not have a large presence in Lisbon. However, brands such as Moxy, Meliá and Curio by Hilton are expected to enter the market. We expect the hotel room supply to grow by 10% over the next three years.

Lisbon’s hotel market is rather illiquid with very few transactions taking place in recent years. The most recent single-asset hotel transaction was the 194-room Penha Longa Resort, located in Sintra, recently purchased by Carlyle Group for €100 million (€515,000 per room). The Portuguese government passed a law in January 2019 to allow REITs to operate in the country, which could be a key driver for future investments in Portugal. Lisbon was the fastest growing market in 2017 and 2018 in terms of value, according to our European Hotel Valuation Index.

The widespread impact of the coronavirus (COVID-19) has had an unprecedented impact on hotels and hotel values worldwide. Consequently, the latest HVI analysis may no longer reflect the most current measure of lodging industry strength or the hospitality investment market.

In each of our offices across the globe, we are working tirelessly to analyze the impact of recent events and provide timely insights to help you navigate these uncharted waters. Because it is unclear how long the pandemic will last or how long related restrictions will be in place, we are updating our analyses on a weekly basis using the most current data.

Additionally, examination of value trends in prior cycles can provide useful information. Historical patterns, together with an understanding of the market’s current expectations for the eventual recovery of the industry and its performance, can provide insights on the likely trajectory of decline and recovery for hotel values.

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For more information, please contact:

Sophie Perret, MRICS, MBA
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Magali Castells
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