Lisbons Tourist Apartments

A growing market
May 2015
Lisbons Tourist Apartments A growing market | May 2015

What is a tourist apartment?

This can be a difficult question to answer considering the high number and different types of independent short-term
let accommodation offer in Lisbon.
Tourist apartments, serviced apartments and local lodging are relatively recent products in the hospitality industry. However, it has
gained popularity in recent years, representing a significant competitor for conventional hotels.
Mainly for vacations and city-break, the local lodging often offer a more central location, a very local, authentic and informal stay,
providing the possibility of accommodating the whole family or groups of friends, at affordable prices. The local lodging apartments can be
individual or included in a full dedicated building, and can be managed by an operator or by its owner.
On the other hand, for corporate visitors and expatriates temporary or permanent, serviced apartments have also became an alternative
to hotels. These apartments are usually operated by hotel chains, with touristic classification as HA Hotel Apartamentos.

Lisbon... What else?

There are no doubts about the popularity of Portugal these days, and
Lisbon is in the limelight of global tourism. It is easy to understand the
reasons behind the popularity of Lisbon and what makes it so
special. History, tradition, modernity, beauty, beaches, climate,
cuisine and charm, make the portuguese capital a unique
destination in Europe, and at a very decent and affordable prices.
According with a survey made by Lisbon Tourism in 2013, more than
a half of the surveyed tourist claimed that the trip to Lisbon exceeded
its expectations and include Lisbon in the top 5 of recommended
cities. This satisfaction is confirmed by the several international
distinctions that the city has recently received: According to BBC
Travel, Lisbon is among the Top Five cities in the world where you
can live large, for a little. Lisbon was also chosen as Europes
Leading City Break Destination by the World Travel Awards and by
the Amadeus & WTM Travel Experience Awards; and also reached
the 9th place in the world ranking of cities chosen to host international
meetings and conferences, produced by the ICCA (International
Congress & Convention Association).
In addition to the awards, Portuguese government has invested a lot
in tourism in the last few years, and familiar faces like Cristiano
Ronaldo, Jos Mourinho and Sara Sampaio also brand Portugal
wherever they go, giving more visibility to the country.

Weatherwise Magazine considers Lisbon as the 6th city with the

best climate, making it one of the most comfortable major cities in
the world. Lisbon is also the European capital with more hours of
sunlight per day

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 Lisbons Tourist Apartments A growing market | May 2015

Lisbon Tourism A Brief

Outlook
Passengers
Lisbon tourism indexes have raised in the last decade, and this
upward trend is now even more evident.
According with ANA Airport , the Lisbon airport recorded a growth of
more than 65% in passengers during the last 10 years. In 2013, 16
million passengers passed through this airport, up by 4.6% compared
122 direct destinations from Cruise ship passengers who stop
with 2012. In 2014, the number of passengers increased to 18
Lisbon Airport, 16 more than over in Lisbon place the capital
millions, which represents an Y-o-Y growth of 13.3%. At the same
2013. Lisbon-Bogot- on the top 10 destinations to
time the number of direct destinations has also increased and Lisbon
Panam is one of new visit.
is currently linked to a more than 120 destinations.
routes.
Low cost carriers are a trend more and more present, being part of Source: ANA; Porto de Lisboa
the strategy of many companies. In 2014, more than 20% of Lisbon
Airport passengers were low cost passengers. Ryanair, that opened
its base at Lisbon Airport in 2013, carried more than a million
passengers in 2014 and currently counts with 17 routs from Lisbon.
Regarding cruise ship passengers, after an increase of 7% between
Hospitality Guests Room Nights
2012 and 2013, the number of passengers in Lisbon port reduced (Lisbon City 2014) (Lisbon City 2014)
10% in 2014. However, it is expected the growth return. In the first
three months of 2015 the number of passengers has already grown
20% Y-o-Y and the completion of the new check in/ check out
cruise terminal will extend the capacity of cruises parking, which will
allow the growing trend, both in tourists and overnights.
Despite the decrease recorded in 2008 and 2009, the number of 80% are foreigners,
hospitality guests in Lisbon increased by 50% over the last 10 representing an
years. From 2012 to 2013 the number of guests increased 4.6% and increase of 15%.
Source: INE
in 2014, with a total of 3.6 millions, the growth reached 14,5%, when
compared to 2013.
Were registered 8.4 millions of overnights in Lisbon during 2014,
which represents a 16% Y-o-Y growth. This was the indicator with the
greatest growth, continuing the increase of 7% already registered in
2013. Foreigners Overnight Origins
(Lisbon City - 2014)
The market share from Angola, Russia and China is still quite low.
However, forecasts indicate that exponential growth of this countries
middle class will undoubtedly have a positive impact on Portuguese
tourism.
According to the Motivational Survey made by Lisbon Tourism in
2013, 69.5% of the foreigners tourists visit Portugal in leisure
traveling, that usually mean longer stays, compared to about 19%
that visited Portugal in business trips. In terms of average day
expenses, the US visitors are on top, with an average of 141 per day
(excluding transport and accommodation).

Note: These are not all the nationalities of tourists visiting Lisbon

Source: INE

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Lisbons Tourist Apartments A growing market | May 2015

In terms of operational indicators, Occupancy Rate in Lisbon city in Evolution of Hotel Rooms Supply
2013 was 67%, which represents an annual increase of 2.3%. In
2014 this indicator reached 73%, which represents an Y-o-Y growth of 20.000
8.8%. The Average Daily Rate in 2013 was 74.65, 4% higher than in 17.500
2012 and in 2014 this value increased to 78.31, growing about 5%.
In result to this tendency, the RevPar also increased. The revenue per 15.000
available room in 2014 fixed on 57,94, which represents a 14.1% 12.500
growth when compared to 2013, showing the performance

Rooms
10.000
improvements of this market.
7.500
Overall, the performance of this industry is clearly increasing,
boosted by the high demand registered, which is also confirmed by 5.000
the relevant increase in all touristic indicators.
2.500
On the supply side, the increasing trend remains and the supply of
0
rooms increased about 40% in the last decade. In 2014, with about
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
500 rooms more in the Lisbon hotel market, the supply totalized
approximately 17,600 rooms. The majority of room supply is within 5 star 4 star 3 star 2 star
the 4-star category and is very concentrated in the CBD of Lisbon, like Source: INE
Avenida da Liberdade and Avenida da Repblica and its surroundings.
In the historic centre of Lisbon the supply is still reduced.
Occupancy ADR Average Daily Rate
In terms of pipeline, it is expected the development of more than 20 (Lisbon City 2014) (Lisbon City 2014)
new hotel units in Lisbon, totalizing an increase of more than 2,000
bedrooms between 2015 and 2017. This new supply is mainly in 4 and
5-star categories, some in the historic centre like Baixa, but the
majority in Avenidas-axis.

Source: Observatrio do Turismo de Lisboa

Hotel Rooms Supply: Existing & Pipeline

Existing in 2014
1,154 Pipeline Jupiter Hotel Lisboa
Hotel Vincci
2,685 Palace Lisboa Hotel
1,648
2015 Lux Lisboa Park
Eurostars Cais de Santarm
5,996 Turim Saldanha Hotel
Turim Terreiro do Pao Hotel
Hostel Pestana
765
4,055 725
74
66
345 Memmo Prncipe Real
161 1,017 341
2016 Turim Boulevard Hotel
452
Turim Marqus de Pombal
115 Hotel Real

Alcntara Av. Liberdade Belm Santos / Estrela Other 160

2017 Meli Convento de Santa Justa
Alm. Reis Avenidas Chiado S. Bento / P. Real
Amoreiras Baixa Pq. Naes Castelo / Alfama
Rooms No.
(JLL Estimation)
Source: INE and Observatrio do turismo de Lisboa

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 Lisbons Tourist Apartments A growing market | May 2015

Lisbons Tourist Apartments Market

Like in other European cities, in Lisbon, this type of accommodation has been considered as an alternative to the traditional and massive
hotel supply. The change of guests habits, that started looking for a more authentic and economic accommodation choice, capable of
providing a new experience and closer to locals has had a great impact in this market. This changes lead to the development of several
guest houses, hostels and tourist apartments, usually located in the historic centre, where there was a lack of supply. Simultaneously,
investors looking for Golden Visa saw in this market an opportunity to obtain profits from their assets. With all this dynamic, we can currently
attend to a great dynamism in the historic centres buildings refurbishment, which contributes to a continuous growth of the supply of this
type of accommodation.
There are four types of players in this market: Developers, that develop buildings entirely allocated for this use and that usually sell fractions
with the management of the operation guaranteed, p.e. Coporgest / Lisbon Best Apartments or Habitat Vitae (Five Stars) / Lisbon Downtown
Lovers; Owner Operators, that promote and operate their buildings of tourist apartments, p.e. Heritage Apartments or Lisbonaire
Apartments; Operators, that usually manage several units (individual apartments or an entire building) owned by third parties, p.e. Feels
Like Home, Lisbon Serviced Apartments or Portugal Exclusive Homes ; or Individual operators, that normally operate their own
apartments, which on a market that tends to professionalize and considering economies of scale most of the times end up joining the bigger
operators.
Despite the high growth, this stills a non-consolidated market, with a very recent legislation and with no statistical data, which difficult its
measurement. Before the Local Lodging legislation implementation, in the end of 2014, some of these establishments were identified as
residential units and not specifically for touristic use. Therefore, this study is base on several interviews to operators in this market and also
on a sample of 70 apartments available on the booking.com platform.

How did this market appear?

During the last years surged several factors that led to the exponential growth of
this market in Lisbon:
Global trend- Increase of demand for alternative touristic accommodation in
city centres - more authenticity, more experience;
Rise of the B2C internet platforms that allow clients to book directly their
accommodation, such as Booking.com, Airbnb, Windu, Homeaway, etc.;
Lack of hotel supply in the historic centre, where at the same time, there was a
huge amount of vacant properties;
Decrease of demand in apartments acquisitions;
New property taxes that penalize unoccupied property;
New Urban Lease Law, that allowed to dislodge old tenants and the
refurbishment of several buildings;
Perception that the profit is higher than the traditional residential long-term
leasing;
Lack of legislation that allowed an easy entry for everyone interested;
These factors triggered the entrance of new operators, lots of them individual and
informal players, creating a deregulated market with under pressure margins.
However, with new Local Lodging legislation, this market should regulate in a short
medium term, becorning a more consolidated and balanced segment.

Serviced Apartments
The serviced apartments supply in Lisbon is short, there are only about 400 apartments located mainly at Av. da Liberdade. The current offer
is more segmented to the corporate market, with typologies typically from T0 to T2, that provide the common hotel services. The serviced
apartments are usually classified as HA Hotel Apartments and according to the market research, are usually more expensive than the
Local Lodgings. The average daily rate per person is about 40 and the prices have slightly increased since the last year research.

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Lisbons Tourist Apartments A growing market | May 2015

Local Lodgings
Supply
2015 Average Asking Price, by Apartment Capacity
In JLL research is estimated that this type of accommodation has
around 3,500 to 4,000 apartments in the Lisbon market, being a large 250
part operated by individual/informal operators. This type of 207
200 187
accommodation is usually sought by foreigners that usually travel in
166
family or large groups, offering a more authentic stay than the 150 146
139

(/day)
133 143 137 121
123
traditional hotels and serviced apartments. According to our analysis, 100 105 114 111
86 81 96
the apartments are mainly T1 or T2, but it can differ between T0 and 83 74 84 73
T4. 50

The quality of the existing supply is also diverse. Casas da Baixa -

Chiado Bairro Baixa Av. S. Bento / Santos / Castelo /
Jules & Madeleine, Heritage Apartments or Mercador are some Alto Liberdade P. Real Estrela Alfama
examples of high quality apartments and this operators stand out not
only by its apartments finishings quality and premium/luxury 2 Persons 4 Persons 6 Persons

decoration, but also by the personal service that provide to their

clients.
2015 Average Asking Price, by Season and Capacity
Regarding the location, according to the market research it is
200
estimated that 85% of the tourist apartments supply is located in the 170
main historic zones of Lisbon, like Castelo/Alfama, Baixa, 160
150
Chiado/Bairro Alto and Prncipe Real. However, due to its informal 127 136
121
characterization there is no reliable information about it.
(/day)

100 89 100
From our sample, the areas with the highest prices are Chiado, 83
72
followed by Bairro Alto and Baixa, being Chiado and Baixa the zones 50
where we can find the apartments with higher capacity. The price is
influenced by the location as well as the quality and capacity of each -
apartment. While Chiado, with a high supply of premium apartments 2 persons 4 persons 6 persons
and with high capacity has a daily average price per person of 39, High season Medium season Low season
Castelo that has some lower quality categories and smaller
Note: Analysis based in a sample of 70 apartments during 2015.
dimension apartments, has a daily average price per person of 26. Source: Booking - JLL analysis
Comparatively to a review made last year, the prices have slightly
dropped, due to the pressure of the increasing supply, mainly of
apartments of individual operators. Tourist Apartments Supply

Demand
The demand of tourist apartments is mainly from foreign tourists that
come for leisure and city-breaks trips. This type of visitors come
mainly in groups of more than two persons, looking for a more
economic and authentic choice of accommodation. According to
interviews made to some operators, we estimate an annual
occupancy rate of about 60% in 2014. However, with the high level
of demand registered, this value is expected to increase during this
year.
Pipeline
It is expected the continuous growth of this market and lot of
refurbishment projects are appearing. International and national
investors or developers, are buying buildings in the Historic Centre of
Lisbon with a refurbishment purpose. Converting the asset to tourist Alcntara Avenidas Pq. Naes Castelo / Alfama
apartments allows a good profitability for investors, trend that is
Alm. Reis Baixa Santos / Estrela
increasingly taken into consideration by Golden Visa investors. Due
to the still informal process of asset management, it is difficult to Av. Liberdade Chiado S. Bento / P. Real
identify new projects in this market, but it is expected a new pace. Source: JLL analysis

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 Lisbons Tourist Apartments A growing market | May 2015

The Local Lodgings Law

In November 2014, the government has created a law to regulate the Local Lodging market. According to this law, a Local Lodging is any
residential unit with authorization for a temporary accommodation provided by remuneration, but without conditions for being considered a
touristic development. In this regime are included villas, apartments or lodging establishments composed by bedrooms, like Hostels. This
type of establishments activity is considered as provision of accommodation services and is not equal to the tourist establishment activity.
This distinction allows an easier way to operate, when compared with the more demanding touristic developments law.
In summary, a residential unit is considered a Local Lodging unit when:
a) A house is advertised or intermediated by any entity as lodging for tourists or temporary lodging;
b) In addition to the accommodation, are offered services like room cleaning or reception for a period bellow 30 days.
Among this legislations requests, a Local Lodging should not exceed a maximum capacity of nine bedrooms and 30 guests (except hostels)
and each player can only operate a maximum volume of nine apartments per building.
To comply this legislation the operators have to register the establishment in the city council, providing the necessary legal elements and
information, which will allow the professionalization of the sector. This registration is free and a mandatory condition to operate. Started the
registration, the establishment will be subject to an inspection, in order to avoid any misinterpretation of the law.
According to Tourism of Portugal, since the implementation of this law, were registered 1,300 apartments as local lodging in Lisbon, tripling
the number registered so far.
This procedure will enable the control of this market and also the establishment of metrics to follow the trends of this new and increasingly
demanding market.

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Lisbons Tourist Apartments A Growing Market

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