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Portugal: Tourism badly in pain

 

Portugal tourism crashed

To win on tourism you need more than a little bit of luck. Portugal had its lucky days – if ever a deluge of tourists may be seen as a good fortune. Since 2015 international tourists became uneasy after hundreds of bystanders lost their lives in a string of highly visible terrorist attacks spreading over a number of important destinations, including Paris (Charlie Hebdo on 7 January 2017, and Bataclan on 13 November 2015), Tunis (Bardo National Museum, 18 March 2015), Ankara (bombing, 10 October 2015), Sinai, Egypt (bombing, 31 October 2015), Nice (truck attack, 14 July 2016), Berlin (truck attack, 19 December 2016), Manchester (Arena bombing, 22 May 2017), London (car attack, London Bridge, 3 June 2017), Barcelona (van attack, 17 August 2017). Portugal seized the opportunity, offering the crowds the affordable alternative of a safe haven, with zero terrorism, on top of the traditional 3-S (sea, sand and sun) and a gourmet’s choice of inexpensive first grade wines. Tourism entrepreneurs made the required investments, and succeeded in increasing the total revenue in tourist accommodation by more than twofold (average annual growth of 13.27% or 9.35% per available room). But the wheel of luck never stops spinning. The coronavirus turned the Portuguese edifice upside down in just a few weeks. The revenue per room still grew year-on-year in January and February, but it tumbled to the abyss in March (-57.00%) and reached the rock-bottom in April (-90.13%). Until it recovers to anything near the pre-Covid19 situation, many moons will cross the skies, and many tourism entrepreneurs will go bust. Like gambling, tourism is full of surprises.

 

Double jeopardy: rooms up, tourists down

The irresistible growth of tourism lodgings, coupled with the sudden vanishing of tourists raises an issue that looks terribly familiar to all manufacturing operations managers: how to match workload and capability? There is no easy solution. Excess capacity means idle capital, which means operating losses that can quickly lead to bankruptcy. Excess workload means inability to deliver, which means fleeing customers that will increase the competition’s market share, a huge threat to one’s business. The Covid19 pandemic has just placed Portugal’s tourism industry between the hammer of scanty tourists and the anvil of plentiful rooms.

In its 17 June 2020 report, INE (Portugal’s national institute of statistics) acknowledges that tourism activity had almost null expression in April 2020. The tourist accommodation sector registered 60.1 thousand guests and 175.5 thousand overnight stays in April 2020, corresponding to year-on-year rates of change of -97.4% and -97.0% respectively (-62.6% and -58.7% in March 2020, in the same order). Overnight stays of residents declined by 93.0% (-58.1% in March) and those of non-residents decreased by 98.6% (-58.9% in the previous month).

Tourists do not show up. We lack specific data on international tourist arrivals by land, sea or air. However, the evaluation of passenger activity in the Portuguese airports points to a brutal collapse of the numbers of international passengers. In March 2020, the number of air travelers in international flights shrunk by -52.88% (-53.52% for both domestic and international flights) compared to the same month of 2019. The disorderly closing of land borders, the grounding of passenger aircrafts, and the quarantine imposed on cruise and other passenger vessels could only rarefy the inflow of tourists even further.

The result on the stays of guests in tourist establishments takes dramatic proportions. From 2013 to 2019 the total of stays grew by more than 77 percent, at the average annual rate of 10 percent. Foreigners contributed with the larger portion, with a growth of 89 percent at the annual rate of 11.2 percent. The first four months of 2020, compared with the same period of 2019, saw a steep decline of -49.64 percent. April showed an almost absolute vaporization of guest stays, falling from 1,439,085 in 2019 to an insignificant 15,013 or a -99 percent change.

In parallel, the number of tourist accommodation establishments kept increasing, offering a rising number of rooms and beds. From 2013 to 2018 the number of establishments doubled, the rooms available increased by 27% (annual average 4.9%) and the beds by 30% (annual average 5.34%). The trend likely continued thereafter (although data is not yet available) inflating the supply of tourist accommodation to new highs. March 2020 acted like a vacuum cleaner and by April the cornucopia of rooms could only show empty beds.

The combination of elusive tourists and countless beds froze the business altogether, bringing revenue per room from the heights of the €49 average for 2019, to the depths of €4,51 in April 2020. The episode should ring a bell about the inappropriateness of rendering mass tourism a pillar of the economy. Mass tourism is to blame for countless damages, including degradation of natural habitats, endangering the integrity of the sites, causing the loss of biodiversity, making urban grounds noisy and dirty, reducing affordable housing for locals, increasing prices, inducing wild speculation and straining municipal budgets. So much so that many destinations have taken steps to curb tourist arrivals. Barcelona, Amsterdam or Venice have placed constraints on tourist traffic in selected neighborhoods. The Easter Island, the Galapagos, the Mont-Blanc have curbed the number of visitors. Santorin (Greece), Bhutan, Boracay (Philippines) placed controls on the admission of tourists.

The unbridled development of vacation homes, holiday villages and tourist accommodations become a nightmare when, short of tourists, the homes remain closed, the villages deserted, the accommodations empty and the beds cold. Local municipalities see their tax revenues shrink, while maintenance expenses (roads and tracks, sewage, gardening, lighting, water supply, security, waste disposal, etc.) keep rising. Ultimately the system crumbles, leaving behind bankrupt administrations, derelict buildings and phantom holiday villages – as one that you may have tripped upon while loitering up in the mountains or by the seaside.

Sustainable tourism is an oxymoron. Tourism is viable only if practised with discretion and restraint, but need or greed push it irrevocably up to massive proportions. What could be a source of enriching and pleasurable experiences, becomes a scourge. We should be well advised to get inspiration from the Swiss people who, in 2012, decided to set to 20% the limit of vacation homes in the communes, in order to prevent the mitage des montagnes (urban sprawl in the mountains). The alternative is to allow catastrophic events such as the Covid19 to take care of the issue the hard way.

Go to top Total revenue in tourist accommodation establishments, Portugal, 2013 - 2020

2013201420152016201720182019Average Growth
2013-2019
2020
(Jan-Apr)
Y/Y Change
TotalPer roomTotalPer roomTotalPer roomTotalPer roomTotalPer roomTotalPer roomTotalPer roomTotalPer roomTotalPer room(2020/2019)
€10³€10³€10³€10³€10³€10³€10³%%€10³%
January73,68813.1780,39314.1997,42516.23110,48718.29131,93321.07150,15023.27163,97323.9814.26%10.50%175,31524.943.99%
February83,91116.0090,10316.56104,03918.78127,90921.68147,25625.38164,72927.27172,17926.8112.73%8.98%195,29928.496.28%
March120,98720.42125,28620.43146,86722.87182,41628.20200,85129.93241,21934.78248,39933.8712.74%8.80%99,64914.57-57.00%
April 143,04924.07177,08128.08194,44630.73217,84033.25290,59543.45303,45043.61333,53545.7015.15%11.28%5,6544.51-90.13%
May186,93830.03220,64433.78243,25435.83284,05141.10339,48148.12379,95352.01397,87551.8913.42%9.55%   
June212,82435.43228,20835.83270,23441.75317,19747.53379,14055.24416,79358.69466,09862.7313.96%9.99%   
July262,70042.99292,15346.09338,53852.18406,55460.12468,82667.72506,30470.48534,66370.6012.57%8.62%   
August324,72354.88369,67960.39422,37766.02483,05773.36555,29181.30592,25283.13635,53484.5511.84%7.47%   
September238,89339.17270,16143.05316,00148.89374,50755.40450,72264.84467,51565.25499,17766.3813.07%9.19%   
October180,72927.95207,21931.37237,85435.01290,14841.17350,78649.36368,12149.19389,51550.1213.65%10.22%   
November101,49917.68116,58419.43131,52821.32163,92926.34192,38130.50208,39931.14229,91832.0614.60%10.43%   
December93,99815.25108,38617.62125,17719.76145,66022.39173,94626.45187,66726.58204,71727.8213.85%10.54%   
Total2,023,94028.932,285,89631.512,627,74135.123,103,75540.233,681,20746.693,986,55348.474,275,58349.4413.27%9.35%475,917 -48.16%
Average (monthly)168,662 190,491 218,978 258,646 306,767 332,213 356,299   118,979 -48.16%
Source: INE Instituto Nacional de Estatística - Estatísticas do Turismo

Go to top Tourist accommodation offer and potential demand

 201320142015201620172018Change
2013 -2018Average
annual growth
Establishments3,3453,5784,3394,8055,8406,868105.32%15.47%
Rooms145,020151,896158,853166,448175,056184,43527.18%4.93%
Beds (Capacidade do Alojamento)326,187342,497362,005380,818402,832423,15229.73%5.34%
Total tourists (10³) 3,9804,1374,4734,5434,5814,92923.83%4.37%
Source: INE Instituto Nacional de Estatística - Estatísticas do Turismo : 2013 to 2018

Go to top Flow of passengers of commercial flights in Portuguese airports

 Number of passengersChange
 Jan 2019Feb 2019Mar 2019Total
Q1 2019
Jan 2020Fev 2020Mar 2020Total
Q1 2019
Jan 2020Fev.20Mar 2020Total
Total3,496,0583,397,7614,291,23711,185,0563,730,2013,741,3691,994,3859,465,9556.70%10.11%-53.52%-15.37%
Domestic flights694,873644,031798,2432,137,147668,416651,776348,6201,668,812-3.81%1.20%-56.33%-21.91%
International flights2,801,1852,753,7303,492,9949,047,9093,061,7853,089,5931,645,7657,797,1439.30%12.20%-52.88%-13.82%
Source: INE Instituto Nacional de Estatística, Inquérito aos Aeroportos e Aeródromos (ANA/ANAC/INE)

Go to top Guests in tourist accommodation establishments

 2013201420152016201720182019Growth20192020Change
2013-2019Annual
average
Jan - Apr2020 / 2019
Total15,205,42117,295,96119,144,23921,217,10323,885,57225,155,32826,973,89777.40%10.02%6,817,9563,765,783-44.77%
Non-resident guests8,624,0999,899,30611,053,32512,531,00614,531,15115,227,16416,301,90089.03%11.20%3,938,7641,983,404-49.64%
Source: INE Instituto Nacional de Estatística - Estatísticas do Turismo