Tourism: Portugal’s Antidote to the Crisis

The legendary Line 28 tram, winding its way through the narrow, steep streets of Lisbon, remains packed with passengers. The “White City,” much like the Algarve, is being swarmed by foreign tourists—a much-needed windfall for the country amidst its ongoing crisis.

« Tourism in Portugal has experienced its highest growth in recent years over the past few months,” stated Minister of Economy Antonio Pires de Lima, noting an increase of “nearly 10%.

Revenue generated by foreign tourists climbed 8.2% to €3.7 billion in the first half of the year. Reflecting the crisis in the neighboring country, there were fewer Spanish visitors (-3.8%), but an increase in Americans (+16.8%), Germans (+14%), and French (+10.8%).

“We were torn between Barcelona, Rome, and Athens, but Greece is struggling. Here, you don’t get the impression of being in a country in crisis,” explains Christian Fièvre, a retired craftsman from Orléans (central France), as he strolls with his wife Maryse along Avenida da Liberdade in the heart of Lisbon.

“They will pull through; they are hardworking people who never complain. Traveling here is a way to help them,” he comments.

Tourism, which accounts for 9.2% of GDP, “is the sector contributing most to Portugal’s recovery,” noted the Secretary of State for Tourism, Adolfo Mesquita Nunes. After two and a half years of recession, Portugal returned to growth in the second quarter (+1.1%).

The surge in tourism has provided a significant boost to the national airline TAP, which carried 1.11 million passengers in August, marking a historic monthly record.

“We are seeing a 5% to 10% increase in clients compared to last year, particularly from the United States, France, and Germany,” shares Carlos Jesus, co-manager of Albergaria Senhora do Monte, perched atop the highest of Lisbon’s seven hills.

However, regarding revenue, the hotel—which offers a sweeping view of the Tagus River and the city’s white and ochre facades, attracting celebrities such as Alain Tanner and John Malkovich—has yet to return to its former glory.

Prices falling

A total of 3.6 million foreign tourists (+8.1%) visited Portugal during the first six months of the year.

Portugal has successfully capitalized on the turbulence in Egypt and Tunisia: “Security played a major role; we captured the tourists who had abandoned those destinations,” Frederico Costa, President of Turismo de Portugal, the country’s national tourism promotion agency, explained to AFP.

The drop in prices, often cited by tourists to explain their choice of Portugal, is “not the most decisive factor” for Mr. Costa, especially since “hotel rates have begun to rise again.”

Portugal is pushing back against the “low-cost” label: the country has developed a luxury hotel sector, established itself as a premier golf destination, and is investing heavily in cultural tourism.

However, dining out remains affordable. “Portugal is less expensive than Japan; the food is excellent and the portions are huge,” says Masako Matsuda, an insurance professional from Osaka, Japan, who endured a 17-hour flight to enjoy Lisbon’s famous pasteis de nata—those creamy custard tarts with flaky pastry.

The fine sandy beaches of the Algarve have also benefited from the tourism boom. Visitors from Germany (+21.8%), the United Kingdom (+10.4%), and France (+37.9%) reached record numbers, while Portuguese vacationers became less frequent (-4.9%).

« Occupancy rates have certainly increased, but revenues are not necessarily following suit,” notes Eliderico Viegas, president of the Association of the Algarve Hotel Industry (AHETA). To his great regret, “prices are low and tourists are spending less.