Portugal can expand its tourism industry, but a Bank of Portugal governor has warned that the formula that fueled its phenomenal rise over the past fifteen years cannot be replicated. Lisbon and the Algarve, Portugal’s twin jewels, have reached a point where they cannot accommodate more and more visitors, year after year, without generating unacceptable side-effects. Instead, the country must concentrate on other areas, higher value and more evenly distributed along the seasons.
Álvaro Santos Pereira, governor of the Bank of Portugal, has sounded the alarm. Portugal’s tourism has strengthened its role in the economy over the last decade and a half, but the good times will not last if the emphasis continues to be on the quantity of visitors and not on quality. Experts do not believe that Portugal has exhausted its potential in tourism, but there are areas of opportunity other than the two main tourist destinations, currently overwhelmed by demand and very seasonal.
A look at the statistics published by the Bank of Portugal reveals that the trend has already begun. The contribution of the Algarve to the total number of overnight stays by tourists in Portugal fell from 36.9% in 2014 to 28.4% in 2024. Other areas, especially in the north of the country, have gained market share. There is potential in nature, culture, health and wellbeing, and in the promotion of less known areas, which can help to spread tourists more thinly and reduce the lopsidedness of the product.
Santos Pereira went further and predicted that emphasis would shift from quantity to value. More high-value products and services will be developed, with an improvement in quality, encouraging longer stays by tourists, who will also be tempted to venture outside the traditional tourist areas. Destinations will have to become less reliant on a narrow range of seasons.
To achieve this change in the system, there needs to be an increase in productivity in Portugal’s tourism, which remains an intensive industry in terms of personnel. Attracting and retaining staff is a severe problem for companies in this sector, which see their employees going to other industries. The wages in this industry are well below the national average. While the average monthly wage in Portugal is €1,686, the figure for the tourism sector is €1,145. Although salaries are increasing, the gap between the two sectors remains an obstacle to achieving the desired product quality.
Housing has also become a problem in many tourist areas, where prices are rising to such an extent that those who work in the sector, whether natives or immigrants, cannot afford to live there. According to Pereira, the government cannot formulate tourism policies without taking measures to increase the housing supply, including social housing.
Other factors limiting the growth of Portugal’s tourism are transport infrastructure, geopolitical instability, climate change and the development of artificial intelligence. Nevertheless, this does not alter the fact that the prospects for the tourism sector remain promising, but it will require a shift in strategy that will allow a more even distribution of tourists throughout the year and the regions, while reducing the pressure on Lisbon and the Algarve.
