For Chitra Stern, Portugal’s economic recovery is bringing an unforeseen twist.
When she and her husband opened their first hotel in a small fishing village on the southwestern tip of Portugal in 2010, they had no trouble finding workers to help run it in spite of its remote location. They visited a few hotel management schools, placed ads and were soon interviewing candidates for their Martinhal Sagres Beach Family Resort Hotel. With Portugal on its knees at the time and dozens of hotels on the verge of bankruptcy as the country sank into recession, finding high-skilled, affordable workers was a breeze.
Now, the 47 year old, who owns four hotels in the country with her husband Roman, says she just can’t find enough Portuguese workers.
“With the tourism boom, we now face a shortage of workers, not jobs,” Stern said.
As Portugal starts preparing for what might be a bumper tourist season this summer, people in the industry are beginning to worry about being able to cope with the influx of visitors. Already last year, Portugal’s hotels got a record 20.6 million visitors, about twice the country’s population. Helped by the tourist boom, the economy expanded 2.7 percent, the fastest pace since 2000. Unemployment fell to 8.1 percent in the fourth quarter of last year from a record 17.5 percent in 2013.
Basic jobs
While the recovery in the job market has been good news for Portuguese workers, it has left some hotel owners frustrated in their search for staff. The crunch risks weighing on an industry that accounts for almost 17 percent of the country’s gross domestic product and one in five jobs, according to data compiled by the World Travel & Tourism Council.
“We can get directors but it’s people to fill the most basic jobs that we have trouble finding,” said Raul Martins, head of Portugal’s Hotel Association, which represents about 600 hotel companies.
Martins, who is also the chairman of the Altis hotel chain, estimates there’s a shortfall of about 40,000 workers for hotels. Low wages may be part of the problem—Portugal is western Europe’s cheapest country after Malta in terms of hourly labor costs, according to data compiled by Eurostat.
While hotel revenue and visitor numbers are at record highs, the average net salary for workers in hotels, restaurants and similar professions increased just 7.7 percent in the 2011-2017 period to 632 euros per month, according to Portugal’s national statistics institute. The minimum wage is 580 euros per month. Hotel employees on average make 1,035 euros a month, said Martins, citing a study by Portugal’s Hotel Association.
Hotel openings
The hunt for hotel workers may worsen as dozens of new lodgings are expected to emerge in coming years.
Pestana Hotel Group, Portugal’s biggest hotel operator, said in January it plans to invest 200 million euros (USD248 million) in twenty new hotels through 2020, with half of that investment to be done in its home market. The number of new hotels in Portugal increased 37 percent in the 2011-2017 period to 1,945 units, according to Deloitte’s Portuguese Hospitality Atlas.
Sun, sand and golf have always made Portugal attractive for tourists. The current tourism boom began in 2011 when political upheaval in other sunny destinations like Tunisia and Egypt prompted many foreigners to turn to the southwestern European nation instead.
Fueling the rush are budget carriers like EasyJet Plc and Ryanair Holdings Plc, which began setting up hubs in Portugal in 2012. ANA-Aeroportos de Portugal SA, which operates the country’s airports, said passenger traffic rose to a record in 2017.
“The low-cost airlines are responsible for all the growth in tourism in Portugal,” Michael O’Leary, chief executive officer of Ryanair, said at a press conference in Lisbon on Feb. 21. “We’ve created an entirely new market.”
Foreign workers
Portugal wants more. The government is running an online campaign abroad to attract more visitors during both the high and low seasons. Eurico Brilhante Dias, the secretary of state for internationalization, says his administration is training unemployed workers to fill demand in the tourism sector.
Yet, in a country with no population growth, an increasing number of workers will have to come from abroad, said Stern, the owner of the Martinhal hotels. In February, Stern and her staff carried out presentations to dozens of hotel management students who were visiting Portugal from the U.S.
“The labor market is a big part of the economy that can’t just be switched on and switched off,” Stern said. “Portugal has done very well in terms of raising awareness but if we fail to deliver in terms of service we are destroying a lot of the good work that has been done.” Henrique Almeida, Bloomberg
Blackstone’s bet on malls pays off
Even as many property investors were shunning Portugal during its bailout years, the Blackstone Group LP was buying.
The New York-based private equity firm began shopping for malls in 2013 and that bet is now paying off: it agreed last month to sell three shopping centers around Lisbon to Groupe Auchan SA. It’s currently completing the sale of a fourth mall to Spain’s Merlin Properties Socimi SA for as much as 450 million euros (USD557 million), about twice the amount it paid, according to people with knowledge of the matter.
“Some funds that bought shopping centers during the crisis at a discount are now selling these assets to other foreign funds as the economy recovers,’’ said Pedro Coelho, chief executive officer of Lisbon-based Square Asset Management, which has about 1 billion euros in real estate investments.
After Portugal sought a bailout in 2011, several mall operators struggled with sales amid a recession and an unemployment rate that peaked at 17.5 percent in 2013. It was then that Blackstone began acquiring the first of four malls on the outskirts of Lisbon. A few years later, when the economy started to show signs of a solid recovery, other funds followed suit.
Portugal’s economy expanded an estimated 2.6 percent in 2017, the fastest growth since 2000. Unemployment dropped to 7.8 percent in December, the lowest since 2004, according to Eurostat.
The year has barely begun and deals or possible transactions involving malls have already surpassed 1 billion euros, more than the total invested in 2017, according to Cushman & Wakefield. Broker Jones Lang LaSalle forecasts investment in commercial real estate in Portugal will reach a record 2.5 billion euros this year, up from 1.9 billion euros in 2017.
From her small candy kiosk in the middle of an aisle in the Dolce Vita Tejo mall in the Lisbon suburb of Amadora, Dariany Santos is witnessing the revival of one of Portugal’s largest shopping centers.
“Every day there are more visitors; on weekends it just gets crazy,” the 31-year-
old said as she gazed around a mall that boasts 280 shops, an 11-screen cinema and a model city where children can pretend to be adults. “There are so many people, sometimes they bump into each other.”
The Almada Forum mall, which Blackstone is selling to Merlin, has 230 stores and a food court that seats 1,200. An official at Blackstone declined to comment on the firm’s investments in Portugal.
Portugal’s first modern shopping center, called Amoreiras, opened in Lisbon in 1985, the year before the country joined the European Union. Today, the nation of about 10 million people has 120 malls and one of the highest densities of shopping centers in Europe in terms of gross lettable area per inhabitant. MDT/Bloomberg
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