How the Hospitality Industry is Recovering in a New Normal. Portuguese Hotels

It is 2021 and statistics are showing that people are travelling once again.

After a solid year of staying home, masking up and keeping our collective distance, people are hungry to explore the world.

Yet still, demand is far from its peak. The latest UNWTO data shows that over the first five months of the year, world destinations recorded 147 million fewer international arrivals (overnight visitors) compared to the same period of 2020, or 460 million less than the pre-pandemic year of 2019.

January to May 2021 compared to 2019 results in an 85% decrease.

The same period compared to 2020 results in a 63% decrease.

There is no wonder that when it comes to the battle for the few, hotels, airlines and other travel industries compete and seek new customer segments by offering discounts.

Lower demands and discounts lead to a major drop in travel spending.

According to World Travel & Tourism Council, European International Travel spending dropped from $639.6b in 2019 to $231.2b.

Data by Visualisation by

The biggest crisis in the history of tourism makes a $400b+ impact on the industry. The consequence for travel business was a necessity of cost reductions.

Despite the proactive actions of some governments around the world, in 2020, 62 million jobs were lost, leaving just 272 million employed across the sector globally. This 18.5% decrease was felt across the entire Travel & Tourism ecosystem, with Small and Medium-Sized Enterprises (SMEs).

In the EU itself, accommodation employment dropped by 17%. More than 400 thousand employees of all types have lost their jobs in the accommodation industry.

Data by Eurostat, Visualisation by

But as the vaccination programmes around the world, together with softer restrictions for vaccinated travellers and the use of digital tools such as the EU Digital COVID Certificate, are all contributing to the gradual normalization of travel, the demands are picking up.

This creates an unusual challenge to travel business operations, as reduced resources, cost savings face seasonal peaks of demand.

According to Eurostat, the average net occupancy in hotels and similar properties has been increasing towards the northern hemisphere summer season:

Data by Eurostat, Visualisation by

And while the average country occupancy does not exceed 43%, some resort properties observed very high occupancy.

In such situations, the released resources create an operational gap that pushes the industry to seek automated and reasonable in price technology solutions, to fill it.

Portugal hotel and travel industry take a major part in the challenge.

Total travel spent in Portugal decreased from $38.7b to $16b, which is over a 58% drop.

Clearly, the most hit was international spent.

Data by, Visualisation by

And although employment change in the accommodation industry in Portugal dropped only by 7%, the occupancy has not exceeded 38%.

Data by Eurostat, Visualisation by
Data by Eurostat, Visualisation by

In such heavy conditions, hotel pricing became more important than ever. Every room sold contributes to revenue. Every room not sold contributes to the loss. Both contribute to the bottom line. In an environment where cash flow is the key to survival, pricing takes massive importance.

As all hotels face the same market conditions, traditional Revenue Management strategies push them to use price to compete and attract the remaining demand. This however leads to fall in profits.

We have looked at some major properties in Portugal. This graph is the visualisation of the best-offered price by each hotel in Lisbon, categorised by hotel star rating, as distributed in OTAs.

Data and Visualisation by

This visualisation shows the real hotel pricing situation in the city. Each blue bubble represents one of the 5582 properties we have analysed.

The vertical axis corresponds to the number of stars hotels are rated. The horizontal axis represents the lowest price offered by each hotel.

When looking at the 5-star hotel level, we can observe that some hotel prices start from around 80EUR per night. It gets very crowded between 150EUR and 200EUR range. Then above the 200EUR level, there are some individual properties, and there are three outliers with the price of EUR300, eur400 and eur470 per night.

It is interesting to note that 4-star hotels prices, in the majority are within the same ranges as 5-star hotels. In fact, there are 4 outlier hotels with prices much higher than the 5-star hotels.

Interestingly some 3-star hotels also fall into the range of the 4 and 5-star ones.

This situation shows how competitive the market is. How occupancy level within the 20s and 30s od % push hotels to fight for demand with the price.

Interestingly enough, there is a lot of 0-star hotels and properties available on the OTAs. Their price range covers all-star rating hotels on the market.

This suggests that even if not recognised yet by the industry, the competition between hotels and apartments has a solid ground to start. Possibly the customer has already started to compare hotel rooms with apartments.

Data and Visualisation by

The future outlook of best available prices in Lisbon is quite steady, with some small dive for November and December and uptake by the end of the year. Which is a sign of optimism.

A bit different price positioning we can observe in Faro. Based on the lowest prices available in the next 90 days from 340 properties, we can see that the market is dominated by 3-star properties. Their price range starts at 2-star area and exceeds the 4 stars and 5-star range. There are much fewer 0 category apartments than in Lisbon, possibly creating a less competitive environment. 

Data and Visualisation by

The average lowest available rate outlook shows prices are dropping as from November 1. So the competitiveness will be even stronger, while profitability is weaker.

Data and Visualisation by

A slightly different price competition set is in Lagos. The touristic destination is dominated by non-categorised properties that extend prices beyond hotels.

Few 5-star properties price at 4 & 3-star hotel levels.

The outlook for Lagos is typical to tourism destinations, where outside November seem to be at a lower level. 

Based on the example given, it is important to state that the condition of the hotel and travel industry, despite observed uptakes, is still critical.

With lower demand and lower customer spend, reduced resources, occupancies not reaching 40%, the fight for survival is there.

It is expressed in pricing, where we see that 5-star properties go down to 3star property levels. Offering their 5star product and services at such rates created great value for travellers.

But it puts the lower category of hotels in a pretty bad position.

In addition, the apartment rental industry seems to be popular. As much as the density of apartments varies city by city, the price horizon offered by this type of property is much wider than the pricing of hotels of all categories.

Hotels should address these two trends and make some strategic decisions very carefully.

  • Price war is not easy, but it is the cashflow that is the most important.
  • Customers seek best value for them, and that included apartment style properties as well.

If you are interested in seeing data on your country or city, leave a comment below or reach out to us and we will look into your request and present the most recent and complete analysis in our next article.

Kris Glabinski

Kris Glabinski For over 20 years, Kris has been building Revenue Management, Revenue Development and Distribution for airline and hotel industries in Europe. For the last 10 years, Kris co-created and ran technology companies dealing with Distribution, Revenue Management and Marketing. Among the companies for which Kris has worked or which he co-created are British Airways, Lot Polish Airlines, Qatar Airways, Accor Hotels, Yieldplanet, i-Rates, Roomito, Ratemetrics and Currently, Kris is a part of the Aggregate Intelligence Corporate, which owns several products related to big data for the travel industry. One of the projects developed by Kris, is popularizing rate shopping within the hotel industry. Thanks to Google Data Studio, HowsMyRate offers unlimited rate shopping and visualisations options to every hotel property, at prices that most hoteliers are able to afford.

Kris is also a coach, revenue trainer and speaker and many Revenue Management and hotel conferences, like the Pricing and Revenue Management Summit, organised by Luxatia International.

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