The coronavirus outbreak is posing a major and unprecedented challenge to the Algarve, Portugal’s main tourism destination and with an economy that relies mostly on tourism.
With the number of businesses closing temporarily due to the virus rising every day, the question on everyone’s mind is, how will the Algarve weather this storm?
And especially with Easter just around the corner, the unofficial start to the peak season, when businesses would benefit from the influx of visitors, particularly Spanish (borders are now closed to tourism from our neighbouring country).
Most street restaurants and shops in the Algarve have closed, and shopping centres are virtually empty. Events have been cancelled. People are being told to stay home, leaving streets deserted.
Portugal has closed its borders with Spain – only Portuguese citizens and residents and people transporting goods are allowed to enter.
As we were going to press on Wednesday, President Marcelo Rebelo de Sousa was expected to declare a State of Emergency in the country, which would lead to further restrictions and measures in an effort to contain the virus.
It’s a war-like scenario for a region that survives off its huge influx of holidaymakers.
For now, it seems only time will tell how dire the economic impact of this pandemic will be, although Elidérico Viegas from the Algarve hotelier association (AHETA) warns the effects could be unprecedented.
“People are disoriented,” he told Barlavento newspaper.
Around 80% of the association’s members have reported a decrease of around 30% in bookings compared to the same period last year.
In other words, “this doesn’t mean that 60% of bookings have been cancelled” as many reported. Instead, around 80% of hotels and accommodation establishments in the Algarve have had bookings cancelled, while the other 20% are still uncertain as they work with tour operators and have not yet been informed.
These numbers are “just an average”, Viegas pointed out, adding that AHETA is carrying out a weekly survey to better understand the effects of the pandemic on the hotel industry.
But it isn’t just the Algarve’s tourism sector that is being hit.
AHP, the national association of hoteliers, predicts that Portugal’s hotel industry could lose around €800 million and 7.3 million overnight stays in the next three to four months due to cancellations.
Meantime, the World Travel and Tourism Council warns the pandemic could cut 50 million jobs worldwide in the travel and tourism industry.
The Resident tried to obtain comment from the Algarve’s tourism chief João Fernandes but did not receive a response at the time of going to press.
The property sector is also feeling the effects of the pandemic with several deals being postponed or cancelled, particularly by foreign buyers (click here).
Algarve businesses “won’t give up”
Algarve business association NERA has vowed that businesses “won’t give up” despite the profound economic impact that is expected due to the coronavirus pandemic.
“Nobody knows when and how this crisis will end,” the association said in a statement sent out to newsrooms on Monday, stressing how the country’s situation changed in just a few weeks.
“Our economy is on the verge of a crisis that will evolve unpredictably. We are living a worrying moment of political and economic uncertainty in Europe and across the globe,” NERA said.
While the association’s affiliated businesses acknowledge and agree that the priority for now is “the health and lives of the Portuguese people”, they stress that they also have to prepare for the economic crisis that is on the horizon.
The association applauded the government’s measures so far, which at the time included a €200 million credit line but which has since been bolstered to €3 billion.
NERA now aims to “clarify the details of the proposals” and “ensure that they can be applied quickly and in a simplified manner”, whilst also helping regional companies benefit from them and pressing the government to implement other measures to help Algarve businesses.
Government announces €3 billion credit line to support companies
The Portuguese government announced on Wednesday morning a series of “emergency measures” to help the country face the coronavirus outbreak, including a €3 billion credit line for companies mainly in the tourism and industry sectors.
Nearly half of the sum (€1.3 billion) will go to the textile, footwear, clothing, extractive and logging industries, €400 million of which has been set aside specifically for micro and small-sized companies.
Around €900 million will go to the tourism sector, including accommodation units – €300 million of which once again going straight to micro and small-sized companies. A further €200 million will be channelled into tourism sector companies such as travel agents and event organisers, with €175 million of which going to micro and small-sized companies.
Finally, the restaurant sector will be receiving €600 million in support, again with €270 million of which going to small-sized and micro companies.
The government also announced that it will be offering flexibility on tax payments during the second trimester of 2020 for companies and self-employed workers.
In other words, there will be the option to pay taxes in three monthly instalments without interest or in six monthly instalments with interest only being charged on the last three months.
Finance Minister Mário Centeno also said that these “times of uncertainty” may force the government to amend its State Budget for 2020.
“These are exceptional measures. The government is strongly committed to taking every measure that is necessary to fight this pandemic and prepare for its consequences,” Centeno said in a press conference this morning.
“We seek to guarantee that the government’s aids, as well as the EU rules, do not affect our support to the economy. Flexibility is there and it will be used by everyone in what will be an unprecedented response on a global level,” he said, stressing that the spread of the virus hasn’t yet reached its peak.
He added: “It is time to fight this pandemic but also keep our economy working, maintain jobs and ensure that companies have enough money to meet their obligations with their suppliers, clients and workers. And the State’s role in this matter is fundamental.”
By MICHAEL BRUXO