The Americans are here and this sunny coastal city of Lisbon is boomingreports the WSJ.
In the bars, hotels and restaurants that line the cobblestone streets, business is so good that Mayor Carlos Moedas recently reduced residents’ local income tax. With economic growth of 8.2% last year and a 20% increase in tax revenue since the pre-pandemic era, he has also made public transport free for young and old people.
Building facades are polished after years of neglect. Plans are underway for a new airport, twice the size of the existing one, as well as a three-hour high-speed rail link to Madrid in neighboring Spain. The Tribeca Film Festival is coming to town this fall.
Room prices in the city are increasing and tourism investments are pouring in. Gonçalo Dias, manager and co-owner of Ivens, a $1,000-a-night hotel in central Lisbon, said he plans to add a jazz club to the basement. More than half of its room reservations come from Americans.
“Good times. Best seasons in the last 45 years,” he said. “It’s crazy.”
The Americans overtook the Spanish
In Portugal, a country of 10 million jutting toward the North Atlantic from Spain, Americans recently overtook Spaniards as the largest group of foreign tourists.
“This is literally, for Americans right now, the place to be,” said Ameshia Cross, a Washington-based political strategist who is visiting Portugal for the first time.
Driven by the strength of the dollar
The strong dollar – and a strong post-Covid recovery – have empowered millions of Americans who would have vacationed in the United States before the pandemic. They now discover that they can afford a luxury vacation in Europe.
“Your dollar goes a lot further,” Cross said over coffee in the lobby of his five-star hotel. “You don’t feel like you’re tripping as much.”
During her six-day trip, Cross bought cheap tickets to see Taylor Swift in concert – also the singer’s first visit to Portugal – and shopped for clothes on Avenida da Liberdade. A friend of hers was in Lisbon at the same time, she said. More friends arrived in two weeks and another group in September.
Tourism currently generates a fifth of economic output in Lisbon and supports one in four jobs. This boom has had repercussions well beyond the capital.
Portugal’s gross domestic product grew by almost 8% between 2019 and 2024, compared with less than 1% for Germany, according to estimates from the International Monetary Fund. The government recorded a rare budget surplus of 1.2% of GDP last year, and the debt-to-GDP ratio is expected to fall to 95% this year, the lowest since 2009. Portugal’s population is growing again after years This is partly due to the influx of migrant workers and various tax incentives and investor visas that have attracted high-income workers.
Moedas, mayor of Lisbon, believes there is still room for further development. For a city that doubles in size to about a million people every day, including commuters, only about 35,000 are tourists, he said. “We are very far from a situation called hypertourism.”
The craze for travel and the crisis which boosted competitiveness
This trend is part of a global readjustment following the confinements due to Covid-19. Spending on travel and hospitality worldwide has grown about seven times faster than the global economy over the past two years, according to Oxford Economics. This trend is expected to continue over the next decade, albeit to a lesser extent.
Europe, particularly Southern Europe, has benefited more than many other regions. Despite being home to just 5% of the world’s population, the European Union received about a third of all international tourism dollars last year – more than half a trillion dollars. That’s about three times over two decades and compares to about $150 billion for the United States, where tourism has been slower to recover.
One reason is the brutal sovereign debt crisis that hit the south of the continent particularly hard just ten years ago. Unable to stimulate demand with public spending or boost exports by devaluing their currency – the euro, shared by 20 nations – these countries could only strengthen their competitiveness by lowering wages. That and a real estate crisis that suddenly left hundreds of thousands of workers unemployed have made the region’s tourism industry highly competitive, far cheaper than Caribbean beach destinations and on par with Latin American destinations like the Mexico.
The higher cost of living and a lack of well-paying jobs are encouraging more Portuguese students to leave the country, said Arlindo Ferreira, a school principal in northern Portugal.
Schools also have difficulty recruiting teachers, “not only because of the cost of living, but also because they can get better salaries in other fields,” Ferreira said.
More than a third of highly qualified Portuguese students leave the country after graduating, according to Raquel Varela, a labor historian and professor at the New University of Lisbon. Even the highest-paid tech workers are starting to move to cheaper locations.
Tiago Araújo, CEO of travel tech startup HiJiffy, has kept his employees but says many of them have left Lisbon. This trend, which began during the Covid crisis, is now mainly driven by the housing crisis.
“Europeans have no money”
However, the tourism boom has helped Araújo’s business. Hotels now have additional resources to invest in HiJiffy products, including a Facebook messaging chatbot that allows guests to book rooms directly rather than through large online platforms that charge large commissions.
For many beneficiaries of the boom, the lure of the free-spending Americans who helped drive this transformation is very appealing.
While Dias, the hotel’s owner, is branching out into nightlife, he refuses to envision a future where the industry relies heavily on visitors from elsewhere.
If Americans stop coming to Lisbon, he said, “I don’t think we can charge that kind of (price) because we’ll have to go to the Europeans, and the Europeans don’t have money “.