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Some hotel groups could collapse, says Hotel Association

By CHRIS GRAEME [email protected]

The president of the Portuguese hotels association has warned that the crisis could spell the end of some hotel groups in Portugal.

Miguel Júdice, President of the Associação de Hotelaria de Portugal, said that “many hotel companies were going through tough and difficult times” and some would invariably “go out of business”.

However, contrary to the most pessimistic forecasts, the Portuguese hotel mogul said that the “relatively hot summer months” had been positive for the hotel trade, despite the sector facing “serious problems”, namely an expected increase in VAT, which he claimed could lead to layoffs and the closing down of some companies.

The association has already raised the concern with the current government, the strategy of which, according to Júdice, remains an “unknown factor”.

Speaking in an interview with the daily newspaper Público, he said that the summer season was going “relatively well” compared with expected projections, particularly the month of August which is the traditional period when the Portuguese take their holidays.

But he did warn that the rest of the year was not set to be “fantastic” because both the Portuguese and Spanish were “travelling less” although he did say the prophets of doom would not be borne out.

“It’s too early to say – it’s not going to be a fantastic year but it’s also not going to be a tragic one either,” he said.

Although Portuguese National Statistics Institute figures have shown an increase in receipts and beds filled since the beginning of the year on the same period in 2010, there had also been an increase in supply, which meant many rooms would go untaken.

According to the CEO of the Lágrimas Group, those hotels that were dependent on the national and Spanish markets were suffering the most, although Lisbon, Porto and the Alentejo were all expected to enjoy “acceptable” performances.

Spending less

Both the United Kingdom and German markets were largely the saving grace for the sector while the Brazilian market had also been surprisingly buoyant. “It has grown considerably because of more flights from Brazil to Portugal and there is clearly a potential for growth,” he said.

When it came to the national market, the Portuguese were holidaying and travelling less. Last year they took 15 days of holiday on average compared with 12 this year and when they do take holidays they spend less and don’t eat out so often.

According to the Portuguese hotels association, people are eating less in hotels, using the hotel bar less and are not booking so many spas and therapies in a bid to save money.

“Speak to any hotel owner and they will tell you that these days its normal to see hotel guests coming in with plastic bags with provisions they bought in the local supermarket,” said Miguel Júdice adding that people might travel more but they are doing so on a shoestring budget.

The interview highlighted two major bankruptcies in the hotel sector: Imocom, a partner with the hotel chain Hilton, and Orizon which held Resort Campo Real.

“It’s possible we’ll see more insolvencies because the hotel sector is one that requires a heavy investment to build. For a long time these investments were possible since financial arrangements with banks and other lenders were favourable.

“Lots of new hotels sprung up in recent years, but now that interest rates are increasing and credit is being squeezed, this is putting stress on hotel groups and some will fall by the wayside,” the hotel entrepreneur said.