Portugal’s Hospitality Sector: A New Age for Foreign Investment

Portugal’s strategic location, stunning climate, glorious beaches, and resilient economy, not to mention its terrific cuisine, rich culture, and the fact that country is one of the safest in the world, have caused record numbers of tourists to visit Portugal over the years.

Backed by sustained visitor growth – the number of tourists is expected to increase by 9 percent in 2025 – and supportive public policies that are increasingly looking to the interior regions to boost tourism, Portugal has entered a new golden era for developers, operators, and foreign investors.

Portugal’s Hospitality Sector is Evolving

Portugal’s hospitality sector has experienced sustained growth in recent years, supported by investor-friendly government policies, regulatory stability, and record tourist numbers.

The country has cemented itself as one of Europe’s most attractive markets for international investors who are seeking strong returns and long-term opportunities in the hospitality sector.

Portugal’s hospitality sector has a positive outlook for 2025, accounting for 24 percent of total growth the commercial spere in Portugal. Major global investors such as Invesco, Arrow Global, and Davidson Kempner, have already invested in Portugal’s hotel market, adding to its reputation as a stable and safe investment hub.

Boutique hotels, wellness centers, yoga retreats, and farming experiences are driving more tourists to look beyond Lisbon, the Algarve, and Poro, to enjoy the stunning interior regions of Portugal.

Portugal has a longstanding tradition of tourist apartments, and the ongoing diversification of the hospitality sector can be seen in greater incentives to encourage tourism in the lesser-known interior parts of the country, such as the Alentejo and the North.

Portugal Serviced Apartments and Branded Residences

Sub-sectors such as Portugal serviced apartments and branded residences are becoming popular with investors and developers, providing solid investment potential. Offering more flexible business models, strong yields, and rising demand from tourists, these units can be a smart option for investors and offer a solid ROI.

Portugal serviced apartments

The diverse appeal of serviced accommodations ensures steady occupancy rates and a reliable income stream and has historically generated higher yields. When it comes to serviced apartments, while it is not always the case, it’s common for multiple investors to pool resources to acquire and rent out an entire unit.

Boutique hotels

You also have increasing interest in boutique hotels in Portugal. When it comes to investing in boutique hotels, while institutional investors are present, investing in boutique hotels is often appealing to private investors.

Branded residences

Investors can finance developments through pre-opening sales, which reduces upfront risks and boosts returns. In line with rising demand for premium, experience-driven, branded residences are predicted to rise steadily in the coming years.

Strong Yields Expected in the Hospitality Sector

Portugal’s hotel sector accounts for a significant proportion of the country’s commercial real estate investment, higher than in most other European countries. This is a positive for the market, inspiring confidence amongst both private and institutional investors.

Yields on hotel management agreements in Portugal tend to be high.

• Lisbon: 6 percent
• Porto: 6.25 percent

To out this into perspective with other popular European cities, Madrid stands at 5.75 percent.

Leases:

• Lisbon: 5.5 percent
• Porto: 5.75 percent

Madrid stands at 5 percent, highlighting that for both hotel management and leases, Portugal is the best option for investment if seen through the lens of rental yields.

Yields have been stable in recent years as a result of the limited number of transactions and market opportunities, leading to high demand.

Market Analysis

Hotel pipeline growth of 5 percent in Lisbon and the Algarve – the two most popular places for tourists – aligns with the growth trends observed over the past fourteen years, with Porto also seeing increased supply.

International chains are actively scaling their operations. IHG Hotels & Resorts, for instance, has established a solid footprint with 24 properties already in operation and another 12 in development in Portugal. The company is also shifting attention toward emerging locations like Braga, Évora, and Beja, indicating confidence in secondary markets and aligning with national efforts to promote regional tourism.

The Portuguese hotel group Pestana, the largest in the country, is also leveraging strong financial performance to fuel further growth. With a presence spanning 16 countries and a total of 12,000 rooms, the company recently reached a significant milestone: Eliminating all net debt for the first time since it was founded in 1972. For Pestana, Portugal continues to offer a competitive edge for hospitality investment compared to other destinations.

Growing Tourism Sparked Record Years

Last year was a record year for the tourism sector, as it contributed to 9.7 percent of the nation’s GDP, approximately 20 percent of total exports, and generating €27,7 billion in receipts, which is an 8.8 percent increase compared to the previous year.

According to Turismo de Portugal, over the past seven years, Portugal has seen a 7.7 percent in growth, welcoming more than 31.6 million tourists, and recording more than 80 million overnight stays in 2024, of which more than two-thirds were international tourists.

Lisbon, the Algarve, and the autonomous island of Madeira lead the way when it comes to average room occupancy, with UK, German, French, and Spanish tourists leading the way when it comes to the nationality of international tourists. With this said, there has been an increase in tourists from the USA, Canada, Brazil, and Australia, demonstrating Portugal’s popularity amongst a wide range of countries.

Portugal’s Strategic Edge: A Rising Hub for Sustainable Investment and Global Connectivity

Portugal continues to outpace several other European real estate markets in terms of GDP and export growth, with the sector’s resilience highlighted in recent years, such as in the face of the COVID-19 pandemic.

Portugal benefits from a transparent and accessible real estate landscape, with fewer trade and investment restrictions than the OECD average, according to a recent report from the OECD. Breaking this down, this shows Portugal to be an open market, encouraging international investments into the sector. Investing in Portuguese residential real estate and commercial properties can yield significant returns.

Alongside this, with sustainability increasingly at the forefront of building and real estate discussions, Portugal has positive answers in this regard. In 2022, renewable energy accounted for 61 percent of the nation’s electricity production, exceeding the EU average of 38 percent.

Investment in infrastructure also positions the country in a positive light, with the country now a thriving tech and business hub, namely in cities such as Lisbon, Porto, and Braga. International companies and startups, perhaps kickstarted by Web Summit, the largest tech festival in the world, relocating to Lisbon in 2016, have boosted Portugal’s global presence as a hub for innovation.

As global investors continue to pursue resilient and high-performing markets, Portugal stands out for its robust tourism sector, mature hospitality ecosystem, and supportive investment climate.

Strong investment returns, expansion potential, and a thriving innovation and tech scene present a compelling value proposition for investors. With government backing and untapped opportunities beyond Portugal’s major urban centers, the country is not just a bridge to Europe—it’s a long-term strategic platform for growth, especially within the hospitality sector.