Intersection by Eduardo Abreu, partner at neoturis

Diário Imobiliário

November, 2020

The worst estimates related to the evolution of the pandemic and its impact on the tourism sector are being confirmed. After some (minor) recovery in July and August, the months of October and November today allow us to anticipate that a more consistent recovery will only start after the massive distribution of the vaccine, which will most likely not happen before the end of the first quarter of 2021. That is, more than 1 year operating in (very) low season, consuming hundreds of millions of euros to national hotels and entrepreneurs.

The challenge is thus to try to preserve the installed capacity until the recovery begins, which will allow maintaining in the medium term the competitiveness of the destination and return to the performances of recent years. For this to happen, among many other measures, it is important to act already in the following themes:

Capacity allocation of own capital: the capital consumption in the last months was very significant. Despite a greater capitalization of companies when compared to the economic and financial crisis of 2008-2012, it will not be possible to remedy this situation by resorting to equity capital alone … but it is also not expected that only these will be sufficient (and available) to address the situation. However, their existence is fundamental to bring the financial sector into play.
Behavior of the financial sector: it is at this moment and in our opinion the central issue. Not all companies, projects or regions are the same, and this sector cannot be consigned to a drawer called Imminent Danger. Moratoriums will necessarily come to an end – it can’t be otherwise – but, with the help of own capital, the development of business plans where, not only the revenue line but also the cost line can be revisited, we believe it is possible that most companies can resist. We are talking about a sector that has been growing consecutively for more than 70 years and whose predictable trajectory is positive.
The State: tourism has contributed decisively to Portugal’s recovery and economic growth in recent years. The country’s position and the quality of its entrepreneurs cannot be abandoned during the transition period. Tourism will not be able to contribute to the recovery if it is not itself prepared and able to contribute; instruments that allow the maintenance of competitive jobs and hotel units, coordinated with the financial sector and using the financial envelope that Portugal will have at its disposal seem evident paths. But rapid and that they reach the companies quickly; the allocation of equity capital and the recourse to additional financing will also depend on these measures.
There are naturally other themes on which the evolution of the sector depends, highlighting the uncertainty about the behavior of air transport at a global level. It is important to work now on policies to maintain air links to Portugal in a context of much less aircraft available and focus on the most viable routes by world players. All destinations will think the same, but we depend on air transport more than most destinations (we are more peripheral and with a very limited domestic market) so this investment will be nuclear for the next two or three years.

They will not be easy times, far from it, but does anyone doubt that in 2025 or 2030 Portugal can maintain or strengthen the existing position and dynamics in early 2020?

#consulting #hotelsportugal #neoturis

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