Algarve: New Challenges for Tourism – Shaping a new Reality

  • Elidérico Viegas
  • 25 September 2020

Tourism is one of the most strategic and priority sectors of the Portuguese economy nowadays, with the Algarve being its maximum exponent.

Today, we have a more precise perception of the dimension of the crisis and, above all, of its consequences in the tourism business as well as in the economy. We also know that the return to some normality will only happen from Easter next year, although we are aware that the resumption of Tourist flows will be slow, progressive, and very prolonged, extending over several years.

One thing is certain: before the pandemic we had tourism and, after the pandemic, we will have tourism again.
It is also true that, under the present circumstances, the negative effects on worldwide tourism demand have no end in sight.

Tourism in the Algarve resonates what happens in the rest of the world, namely in other competing tourist destinations, with special emphasis on the Mediterranean countries.

The big question now is to know what will happen during the pandemic and how long it will take, as well as its economic and social impact worldwide in general and in the Algarve in particular.

Another important question is whether after the pandemic everything will return to its previous normality, or if there will be changes in the behaviour of holiday consumers and, above all, how many years it will take to return to the tourist numbers of the past.

It is not difficult to anticipate that the recovery will take a few years, given the implications that are being seen in air transport, as well as in the marketing and distribution channels for holidays all over the world, especially in Europe.
Occupancy rates have fallen by around 60% since the start of the pandemic, and the passenger traffic at Faro airport suffered a 77% drop.

Our main supplier, the United Kingdom, recorded a fall in demand of 79%, as well as all the main foreign markets, namely Germany, Holland, and Ireland to name only the most important ones.

The Algarve is characterized by being essentially a tourist destination for families and therefore subject to strong seasonality, which is why the region faces specific problems of its own.

For the Algarve, the British market represents a third of the total overnight stays, receiving 1.2 million tourists from the UK each year, representing about 6.4 million overnight stays per year.

Almost 50% of passenger traffic at Faro airport is British with 2.2 million arrivals per year.

On the other hand, if we take into consideration second homes and other private accommodations, Britons who visit the Algarve every year are more than 2 million people.

The economic and financial situation of the hotel and tourism companies in the region is based on the realization of investments in intensive capital, using foreign resources, and especially, medium and long-term financing solutions and operations supported by short-term bank credit.

The specificity of Algarve tourism also translates, more concretely, a very marked seasonality of its economic activity. Therefore, between the months of November and March, management and operation are, in general, deficient for the company’s balance sheet.

In this context, hotels and tourist entrepreneurs were forced to proceed with the extinction of jobs. Unemployment has increased by over 200% in the Algarve since the start of the pandemic.

The fact that the United Kingdom imposed a quarantine on citizens arriving from Portugal conditioned the tourist season in the Algarve, although the region was left out of the pandemic, practically since its beginning in March.
In fact, the number of infections with Covid-19 has been extremely low in the Algarve, well below the reference values that determine a particular country or region as unsafe.

Portugal was unable to assert this reality with the British Government, which hurt the entire region and its main economic activity – tourism. Portuguese diplomacy was not up to the occasion nor according to its scrolls.

The recovery of tourism therefore depends on a set of factors of uncertainty that, unfortunately, entrepreneurs do not control or dominate.

Tourism is an economic giant, but a political dwarf, also in Portugal. Public administration services, as well as those responsible for the highest level of governance, need to have a greater and better understanding of the substance of tourism activity in the economy and its strategic importance and role in the life of society and population in general.
The Algarve is the biggest and most important tourism region in Portugal with a share of over 30 per cent of the Portuguese touristic activity. The capacity of the Algarve tourism to generate tradable goods, those that truly count for the national wealth is widely recognized, given the export nature of regional tourist industry.

It is my deep belief that the tourism industry will undergo profound changes. Technologies will change business models and will oblige everyone to adapt themselves to fit into a new world of commercializing and distributing holidays, as well as in air transportation.

The metamorphosis of the tourism business model based on new distribution systems and acess to new technologies are realities that cannot be ignored and must integrate the tourism corporate world, as well as circular economy, another challenge of the present and the future, being this, one of the biggest consequences of the pandemic in the tourism industry.

Tourism is an example of sustainability in Algarve. Tourism will only be sustainable if not made for minorities. It is sustainable because it ensures production with nature without consuming it. There is no sustainability without economic rentability.

Another direct consequence of the pandemic will be a new philosophy of life that aims not only to save money but also to adopt a more frugal lifestyle and way of living, including an important contribution to change human behaviour worldwide.

In my humble opinion, the competitive positioning of tourism will depend to a large extent on our ability to efficiently manage our resources, as strategic reference frameworks, convergence criteria and competitive evaluation, respecting social equity and economic prosperity for all. Algarve will be no exception.

Algarve ultimately and inevitably will adapt to change, although this transition period is going to be very painful for many of our hotels and tourist developments and entrepreneurs.

Therefore, at this stage, we need consistent government support, financial and other, to allow hotels and tourist developments to face the less good period we are going through today.

Historically, tourism in the Algarve has always shown enormous resilience in previous crises. We want to believe that this time it will not be different.

We are certain that, in the name of the best national interest, the Portuguese government will know how to take the most appropriate measures that will allow our hotels and tourist developments to overcome this critical phase in which we are immersed.

Tourism is one of the most strategic and priority sectors of the Portuguese economy nowadays, with the Algarve being its maximum exponent.

The challenge is to survive the pandemic so that, in the recovery phase, we are prepared to face the future with success.
I want to believe that currently, as in the past, the Algarve is well-positioned to face the current challenges arising from a crisis never experienced before.

  • Elidérico Viegas
  • President of the Association of Hotels and Tourist Enterprises of the Algarve (AHETA)