With nearly 2,500 new hotel rooms due to open over the next 18 months the Portuguese capital of Lisbon will continue to attract keen interest from investors as the popularity of the city grows, according to a new report from HVS.

The Market Pulse report, Lisbon Hotel Market Returns to Grace, shows that the city has experienced strong post-pandemic recovery during the second half of 2021 and to date this year, largely due to its appeal to both leisure and increasingly business travellers. As one of Europe’s most ancient cities Lisbon offers a variety of cultural, architectural and business-related attractions together with a warm climate and vibrant, safe atmosphere.

In 2021 tourism in the city saw a 40% increase compared with the previous year and year-to-July 2022 data shows tourism in Lisbon continues to grow, expected to reach pre-pandemic levels by 2023-24. The majority of tourists come from France, Spain and the US with only visitors from Brazil yet to return to pre-covid levels due to on-going travel restrictions.

Strong demand levels for Lisbon since April 2022 has seen the city’s hotels recover from their pandemic-induced decline with RevPAR [rooms revenue per available room] levels now starting to outperform 2019.

“Lisbon’s appeal as a value for money, culturally strong, short-break destination has led to a substantial growth for hotels,” commented report co-author Julia Dzerkach, an analyst for HVS London. “Despite the challenges currently faced by all European hotels, the Lisbon hotel market still offers untapped potential.”

Over the last five years hotel supply in Lisbon has increased significantly in line with the growing number of visitors. In 2021 Lisbon had 270 hotels, providing around 25,250 hotel rooms. “We expect the hotel room supply to grow by 10% over the next three years, including new-to-Lisbon brands such as Hyatt and Locke,” added report co-author Sophie Perret, senior director, HVS London.

The Lisbon hotel market has also seen much transaction activity in 2020/21 with hotel values rising 5.3% in 2021, according to the latest HVS Hotel Valuation Index. Investment in the city’s hotel sector has been further boosted by a new law allowing REITs [Real Estate Investment Trust] to operate in the country. “This could become a key driver for investments in Portugal going forward,” added Perret.