Why are we opening a new hotel in Lisbon and Porto?
The group already has the ambition to grow in the national market for several years. This is to achieve a long-term goal. Lisbon is of particular importance because it is a new market for us – we are based in Porto originally – and it is a goal we have been aiming at for a long time, especially in terms of its active nature.
Do you have other investments in mind?
The group currently has six units in operation, with around 1,100 housing units in operation and the goal by 2024 is to increase it by another 600 housing units.
Which translates to what?
in 12 hotels.
Porto, Lisbon and the Algarve. We currently have these two opportunities, one opening this year and one next year: The Editory Riverside, in Santa Apolónia (Lisbon) this year, and The Editory Boulevard, in Aliados (Porto), in April next year. In 2024, another unit was established in Porto and in the Algarve also in the spring of 2024.
When is a recovery expected? In 2024, do you expect to have the number of hotel units in Portugal?
In Portugal, 12 were performed at this time. And in the pipeline ten.
Are these ten in Portugal?
Don’t you look outside the country?
no not now.
It was our strategic priority. The Porto and Lisbon markets are where we have explored opportunities from a growth point of view and this is where we have focused on our units and size.
2020 was a difficult year for tourism. Most of the hotel units were closed in confinement. Do you have them all unlocked and working?
No, due to lack of demand, we had to close a large part of the units over the past year and then at the beginning of this year. The only exception was Porto Palacio, which was open from the start and even to support the medical staff in the first months of confinement. For the summer we can operate mainly leisure hotels, hence Troia and Algarve. We have closed so far the city units except for Porto Palacio.
What seems to contradict the idea of opening more city units…
We believe in the recovery of the sector and tourism. It is a bet in the medium and long term. In fact, it was previous decisions [à pandemia]. We think this is just a temporary situation. With the vaccination plan in place, let’s hope this summer will be the final start to recovery.
But we believe that – and although cities in this first phase are recording a slower recovery in demand than leisure destinations – with a recovery that we hope will certainly occur in 2024/2025, it will be a matter of time.
For Lisbon, there is an additional problem, because the possibility of a retreat into a state of distrust is on the table. Doesn’t that make you think about delaying?
No. In the specific case of Porto, our decision was to keep one unit open and keep the other units closed due to the volume of demand, as we are not located in Lisbon, and in fact, because this is a long-term., it makes sense to open up, start up and operate in the market.
Will there be concentration movements in the sector? Can Sonae Capital consider these assets?
It makes sense to consider opportunities among our geographic growth priorities, it certainly is. I would say this crisis is another opportunity to focus in a very fragmented sector, but I’ve heard about the focus for many years and haven’t seen any clear signs of that happening.
But are they looking in the market for the assets they can get?
right. We are open to such opportunities.
At what geographical point?
Porto and Lisbon. From the point of view of geographical priority, we maintain this intention.
What are your expectations for the summer?
We’re not very optimistic about the city as a destination, and in fact, we don’t see any signs of a clear recovery until the end of the year.
In Troia, there are positive signs from a demand point of view and the expectation to be able to do something close to what we did in 2019, nonetheless a very positive sign – of course a destination with a certain percentage of citizen demand and that’s why it’s doing better than we expected . In contrast, the Algarve remains well below what we wanted as a result of restrictions on international circulation and the recent news that Portugal has left the green list.
In terms of billing, I suppose 2020 has been a tough year. What do you expect this year? Better than 2020?
I think 2020 has been a disaster for the industry and inevitably for us. We saw a 60% drop in turnover which resulted in around €11 million in sales volume last year. This year we expect it to grow by about 20% compared to 2020.
Much less than 2019?
So short. Even because of these indications that we’re seeing a rebound, we expect that in 2024 we’ll likely be in a position to recover the entire 2019 billing or revenue level.
How do you see this tourism promotion plan? Is it enough to revitalize the sector?
Any help is always welcome and important. So far, look at the moment we’ve had, although some of the decisions may have been slower than what the sector itself needs to make decisions.
For example, simplified layoff procedures were necessary for the sector and for companies to endure months of inactivity. Corporate capital measures and the financing and support of transformation phenomena, whether climate or digital, are essential.
How do you evaluate measures to support the sector?
As I mentioned, positive as much as fundamental: funding, treasury support, capitalization and above all employment support. The only criticism I make is the speed with which decisions are made.
Does it make sense to prolong some?
At this point, if we look at market data and demand forecasts through the end of the year, bearing in mind that the measures to support employment – the simplified layoffs – expire in September, we have to start thinking about extending them at least probably. Until the end of the first trimester of pregnancy.
And if not, could there be jobs at risk?
In the sector, I admit it. In the case of Sonae Capital, based on last year’s performance, we have already taken the necessary reorganization measures.
Does Sonae Capital, in the hotel industry, have credits in case of default? Will they try to stick to corporate capitalization solutions?
The size of the organization meant that some of the actions that were launched were not able to be used.
The size of the group as a whole, not necessarily the hotel unit, but Sonae Capital. This actually prevented us from resorting to some measures. We mainly use recruitment support procedures.
How do you see TAP status? Will the size of TAP after the restructuring serve tourism?
In this aspect, it is a major player for us, for the state and for the tourism sector in particular. I think TAP needs an important policy decision about its future role. Two paths: If we want it to operate as a sustainable company from a financial point of view, it probably has to reflect the activity, on the roads, we will have a company that operates in normal and expected procedures, which is not the case. Weight in the state budget and taxpayers. On the other hand, we have to see if this is the strategic role that TAP should play as a leader and what appears to be its goal, which is like one of the attractions to open up new avenues.
In recent years, TAP options in terms of new routes have somewhat coincided with the growth of some markets: Brazil and the USA.
This is an important aspect. It will likely be a role that TAP will play. I don’t have enough elements to know if this path – not necessarily sustainable from the company’s standpoint per se – generates indirect economic benefits in the economy that are more than worthwhile, so from a community or country point of view, this bet makes sense. I think this needs clarification, as a way to move forward with TAP.