PORTUGAL PORTO HOTEL MARKET REPORT. Accelerating success.

PORTUGAL PORTO HOTEL MARKET REPORT 211 Accelerating success.

211 PORTO HOTEL MARKET REVIEW PORTUGAL TABLE OF CONTENTS Summary Porto Economics Tourism 3 4 4 5 Airport Traffic 6 Tourism Demand 7 Occupancy Hotel Supply Hostels 8 9 1 Future Supply 11 Investment 11

PORTO HOTEL MARKET REPORT 211 PORTUGAL SUMMARY Summary PRESENT GOOD OVERNIGHTS: : 2,6 million overnights and growing. AIRPORT: 6 million passengers and growing. LESS GOOD OCCUPANCY: almost constant. HOTELS: new openings are slowing down? FUTURE PRICES ( ) WEEK W-E ALL 19 24 24 225 5 * (DOUBLE) 54 169 54 184 4 * (DOUBLE) 36 117 36 117 3 * (DOUBLE) 19 74 3 74 LOW SEASON, WWW.BOOKING.COM OVERNIGHTS: Airport Francisco Sá Carneiro traffic will not grow forever, but Colliers International believes that its growing potential has not ceased yet. Although, for the terrible year of 212, no growth is being forecasted, it is, nevertheless, prudent to consider a stable number of passengers, close to the 211 figure: 6 millions passengers. Some routes will (or have already been) be lost, but others, new ones, may very well fulfill the unoccupied slots. OCCUPANCY: With Portugal getting impoverished everyday, the national tourist will travel less and less; however, internationally, Portugal will become more appealing (cheaper). Hence, a small and below average increase in demand will lead the occupancy rate to a stable value through 212. In 213, the big question is whether the increase in the number of rooms on offer (new supply) will overcompensate demand increase; if not, occupancy will be lower, otherwise occupancy may very well stay close to previous years. AVERAGE PRICE: The crisis that is hardly hitting Portugal will not tolerate a price increase, in 212. Prices will remain internationally competitive and may very well be reduced. Presently, hotel prices in Porto are relatively low (see chart), turning Porto as a competitive touristic destiny, inside Europe. This tendency may very well be reversed in 213, if Portugal managers to weather the storm. THREATS FINANCIAL CRISIS. DEMAND SIDE COST CONTROL. SUPPLY SIDE RYANAIR EFFECT CANNOT GO ON FOREVER OR BUSINESSES GROWING WEBIZATION. CAN IT? ANA AND TAP PRIVATIZATION AND INHERENT PERSONNEL FLEXIBILITY QUALIFICATIONS? CONSEQUENCES TO THE AIRPORT. EVERY BUILDING, A POTENTIAL HOTEL? 3 COLLIERS INTERNATIONAL

PORTO HOTEL MARKET REPORT 211 PORTUGAL INTRODUCTION Porto Porto has always been recognized as the major industrial area in Portugal and where lied the national labour force. As time went by, industry was pushed away from the city s perimeter which was, gradually, converted in the services centre of the region, concentrating the best and wider services supply outside Lisbon. However, for the past decades, Porto s Baixa (downtown city centre), once the decision centre across North Portugal, started loosing people and services: people moved to the outskirts of the city (from Matosinhos to Maia and from Vila Nova de Gaia to Gondomar) and services moved to the new CBD: Boavista. Several reasons were behind this transformation, such as the structural problems of the city s Baixa or the inertia of some of the local authorities. Over the past 2 years, Porto lost more than 2% of its population; add to that fact the growing trend to concentrate services supply in Lisbon (driving many services companies to be solely located in Lisbon) and the result is a slow decline of the city s overall importance. Under this gloomy context, tourism emerged, recently, as a factor: the Baixa was revitalized which will, certainly, contribute, in the near future, to stop the loss of population, guaranteeing work places and bringing people back, during the day, but also at night. Today, unlike times past, a foreign tourist with a map getting around Porto is not an unusual sight. Is it to keep? Economics Portugal SUMMARY 211 212 Austerity and troika became well known words to Portuguese people throughout 211. GDP Growth -2,% -3, % Growth has left the dictionary. Unemployment Rate 12,7 % 13,6 % Economic forecasts are very little optimistic and a deep slow down in GDP growth is Inflation 3,6 % 3, % being widely anticipated for 212 and, perhaps, 213. Source: Experian Inflation has not been a problem staying close to the Euro Area criteria. EMPLOYMENT AND UNEMPLOYMENT RATE Employment (% variation, annual) 2, 1,, -1, Unemployment Employment 2, 15, 1, 5, Unemployment Rate Unemployment just keeps growing non stop, bankruptcies are also increasing and public debt remains too high, resisting each new austerity plan. Austerity plans have become usual and are rarely unexpected for people and corporations. People are getting poorer everyday: when employed, income is kept at the same level with increasing taxes; unemployed people, get lower benefits and shorter in time. Corporate turnovers are decreasing and cash management is almost impossible, since invoices due date are very rarely met and increase everyday. Upturn is scheduled to 213 or 214 or 215, if Portugal remains in the Euro Area and if the Euro Area keeps existing under the present standards. Besides all the difficulties widely spread, uncertainty remains a constant. -2,, Source: Experian 4 COLLIERS INTERNATIONAL

PORTO HOTEL MARKET REPORT 211 PORTUGAL TOURISM Tourism WORLD TOURISM Tourist Arrivals (millions) 1. 95 9 85 8 75 7 65 6 55 5 WORLD World wide tourists have doubled over the last 15 years. With internet and globalisation, travelling become available (country borders, low cost) to a large slice of the world s population, increasing tourism to unimaginable levels. In 211, after a decrease in 29, it is expected that the worldwide tourism will grow even further. And, in 213, forecasting predicts that the barrier of one billion tourists will be crossed. Source: U N W T O WORLD TOURISM Tourist Arrivals (millions) 9 6 3 France Spain Turkey Ucraine Greece Portugal Hungary PORTUGAL MARKET SHARE In 27, Portugal had close to 1,5% of all the world tourists. Portugal ranked 2 in that category. Unfortunately, that information has stopped since then. Nonetheless, it is not a far stretch to assume that Portugal must have been keeping its share of world tourism, with tourist arrivals close to 12,5 millions, a long distance away from the 5 million people visiting Spain. France has stayed as the world s largest tourist receiver throughout the last decade, with an 8% share of the world tourism. Source: U N W T O INTERNATIONAL ARRIVALS PORTO Others United Kingdom France Germany Italy Netherlands Spain PORTUGAL AS AN INTERNATIONAL TOURISTIC DESTINY To fully understand Portugal as an international touristic destiny, it is important to understand the nationality of tourists. Using the international arrivals variable, it is possible to conclude that the Spanish tourist is predominant in Portugal, but also in Porto. United Kingdom, France, Germany, Netherlands and Italy complete the set of the major nationalities arriving in Portugal. The ranking has not been changing over the more recent years. However, the distribution is quite different: for instance, in Porto, French, German and British tourists are relatively more important than Dutch and Italians. Source: A N A 5 COLLIERS INTERNATIONAL

PORTO HOTEL MARKET REPORT 211 PORTUGAL AIRPORT TRAFFIC Airport Traffic WORLD PASSENGER MOVEMENT 21 1.. 89331622 75.. 5.. 25.. Source: A C I and A N A 73948113 65884143 66774738 6421174 52828 Airport traffic in Portugal is irrelevant on the world stage. Putting together all the airports in Portugal would not be enough to place the Portugal s passenger movements on the top 3. And total airport traffic in Portugal is less than one third of the total airport traffic of Atlanta. The U. S. A., with five airports among the 1 with higher passenger movement dominate world airport traffic globally. However, it is London (with its 6 airports) the city with larger airport traffic. Furthermore, New York the second city, has none of its airports placed in the top 1. Closer to Portugal, Barajas Airport, in Madrid, has a passenger movement over 5 million people and Barcelona have a passenger movement over 3 million people. Although increasing, Porto s airport passenger movement is irrelevant on a global scene and stands miles away from the examples presented above. PASSENGER MOVEMENT 9.. 6.. 3.. 26 211 GROWTH RATE Over the last 5 years, Porto s airport gained 2,5 million passengers, which translates to a remarkable increase of 78%. Apart from a few airports in Eastern Europe (Russia, Poland and Turkey, with comparable growth rates), only two airports (in Western Europe) had faster growth rates: Charleroi and Eindhoven. However, restricting the analysis to larger airports, only the Bergamo airport (Orio al Serio) has a higher passenger movement and a close growth rate (62% over the same period). Venezia, for instance, with a larger passenger movement, has a much smaller growth rate. Indeed, only the Charleroi (south of Brussels) airport manages to combine passenger movement and growth better than the airport in Porto: almost 6 million passengers and a growth rate of 172% over the last 5 years. Source: every airport website PASSENGER MOVEMENT 6.. 3.. Source: every airport website PORTO IN EUROPE It cannot be neglected that there are several effects in the airport traffic variable that may change the analysis: at starters, the capital effect. A country s capital generally generates higher passenger traffic, because of its own centrality, induced by government and services location. Another important effect is the beach effect : seasonal airport traffic over the Summer (Portugal s airport of Faro is a good example) increases passenger movement in those locations. Although Porto does not possess any of the two mentioned effects, Porto as touristic destiny, will still have to compete with other cities with the capital effect, but will not be in the same segment as sun and beach products. In European cities, without a relevant beach segment (or where the beach is not the major driver of tourism demand), that are not capitals and excluding countries with over 4 million people, Porto airport is the one with a larger passenger movement, above cities such as Göteborg, Thessaloniki or Salzburg. Between Portugal and Spain, Porto s 6 million passengers places its airport in rank 9, distantly behind Madrid, Barcelona and Lisbon, but also sun and beach airports, like the two airports in the Canary Islands, two airports in southern Spain (Malaga and Alicante) and Palma de Mallorca. 6 COLLIERS INTERNATIONAL

PORTO HOTEL MARKET REPORT 211 PORTUGAL TOURISTIC DEMAND Toristic Demand TOTAL OVERNIGHTS 2,8 2,6 2,4 2,2 2 27 28 29 21 Source: I N E OVERNIGHTS Francisco Sá Carneiro Airport growth originated an increase in the overnights total, close to 1%, in 21. Porto, over 21, had a total of 2,6 million overnights. Although smoothly and without data relative to the year of 211, it is possible to be optimistic regarding this variable. Indeed, the increase from 29 to 21 is quite encouraging. Over the previous three years, this variable has remained constant throughout, around 2,4 million overnights. AVERAGE STAY 3 2,5 2 1,5 1,5 Source: I N E (Portugal and Spain) AVERAGE STAY On average, a tourist visiting Porto stays, only, for 1,8 nights. This figure has stayed relatively constant since 28. However, when comparing this value to other cities across Portugal and Spain, it is possible to conclude that this is a quite low value, much lower than Valencia s or even, Lisbon s. Interestingly, it is quite close to the average stay in Madrid or A Coruña. Porto s geographical and competitive positioning in the Northwest of the Iberian Peninsula, highlights that this is a variable where there is still much do and that an increase is just around the corner. SEASONALITY 15% 12% 9% 6% 3% % SEASONALITY Seasonal tourism effects are minimal in Porto. Overnights remain relatively constant through the past 12 months, with no visible peaks or lows. Overnights stayed always above 148. per month in the same period. Following the same comparison as before, Madrid suffers less from seasonal effects and Barcelona and A Coruña as the ones more severely affected by seasonality. This reduced seasonality the same happens in Lisbon, highlights Porto s competitive edge in the city tourism demand, certainly reinforced by the weather, relatively mild, throughout the year. Porto Lisbon Barcelona Madrid Source: I N E (Portugal and Spain) 7 COLLIERS INTERNATIONAL

PORTO HOTEL MARKET REPORT 211 PORTUGAL OCCUPANCY Occupancy Rate OCCUPANCY RATE 8% 6% 4% 29 21 211 Porto Lisbon Barcelona Madrid Source: I N E (Portugal and Spain) OCCUPANCY RATE IN THE IBERIAN PENINSULA Occupancy rate, in Porto, has remained stable over the past 3 years. Change has been almost non existent and this rate has stayed put, close to 62%. Madrid and Lisbon, although with a similar stating rate to Porto s (close to 61% in 29), grew faster than Porto s, reaching much higher figures by 211: occupancy rate close to 67%. On the other side of the scale, A Coruña, has an occupancy rate not higher than 52%. In fact, A Coruña s occupancy rate has even decreased since 29, a singular fact across the cities included in this analysis. OCCUPANCY RATE,8,6,4 28 29 21 211 Total 5* 4* 3* 2* Source: I N E OCCUPANCY RATE BY HOTEL CLASS Decomposing occupancy rate through all hotel classes shows no major variations among them. It is, indeed, quite interesting, that all of the hotel classes (from 2 to 5 star hotels) have ended 211 with an occupancy rate so close to Porto s average occupancy rate: 62%. However, 5 star hotels have had a quite different trend from 2 and 3 star hotels. In fact, the lower class hotels have followed a downward path, decreasing its occupancy rate since 28; on the contrary, 5 star hotels had a fast increase from 28 to 29 (7 pp) and remained stable since then. REVPAR 75 6 45 3 15 29 21 211 Porto Barcelona Madrid Lisbon Source: I N E (Portugal and Spain) REVPAR Income analysis highlights deeply the distance between the Portuguese and the Spanish hotel market. Barcelona s REVPAR is above 75 euros and Madrid s well above 5 euros; even Valencia has a REVPAR almost 1 euros higher than Porto s, which is not higher than 36 euros. Porto s REVPAR, following the trend set by other variables, has changed very little over the past 3 years. ARR 85 7 55 4 28 29 21 211 Total 5* 4* 3* Source: A H P AVERAGE ROOM RATE Average Room Rate (ARR), in Porto, has decreased by almost 5% since 28, although it has increased close to 1% in the past year. This variation has been deeper in 5 star hotels, unlike 4 star s ARR, that has remained steady, close to 6 euros. Curiously, it is worth hotels. noting that 4 star hotels almost replicate the ARR pattern of all Another interesting fact, comparing Porto and Barcelona, is that Porto s 5 star hotels ARR is lower than Barcelona s average REVPAR. 8 COLLIERS INTERNATIONAL

PORTO HOTEL MARKET REPORT 211 PORTUGAL HOTEL SUPPLY ROOM SUPPLY Hotel Supply ROOM SUPPLY Total room supply is close to 1. rooms. Thus, very far away 75. rooms. from total London room supply (above 1. rooms) or Paris However, although quite further behind Valencia s 16. rooms, Porto s room supply levels with some of the Nordic capitals (like Helsinkki or Oslo) or A Coruña; furthermore, Porto s room supply also largely exceeds total room supply in the biggest French cities (Marseille or Lyon), aside from Paris. ROOM SUPPLY DISTRIBUTION ROOM SUPPLY (CLASS) 3 * 28% 2 * 17% 5 * 17% 4 * 38% Room distribution, by hotel class, shows a larger (than in other markets of Portugal and Spain) concentration in 5 star hotels. This trend (weight of Lisbon. 5 star hotels above 15% of total room supply) is even bigger in On the other hand, total room number in 2, or less, star hotels is relatively higher than in Lisbon or other Spanish markets. In fact, this trend is quite similar to the Italian market s(roma or Milano), where lower class hotels weigh for about 2% of total supply. PRESENT ROOM SUPPLY (PERIOD) 3% 2% 1% % ROOM SUPPLY (AREA) Póvoa de Varzim Espinho and Beaches (south) V. N. Gaia Others Antas Maia and Matosinhos Baixa downtown Boavista Another interesting fact in room distribution is that the present structure has stayed the same over the past 1 years. Indeed, new units have spread through the different hotel classes. The exception lies in 5 star hotels rooms, with a decreasing weight and an increasing weight in 4 star hotels rooms. However, unlike a ready made assumption and widespread idea, the total rooms supply has not increased its growth rate over the last years. Over the last 2 years, room supply in Porto has been growing close to 5% p.a.; a growth rate that has not increased over the past 2 years. This widespread idea of a fast growth rate in hotel room supply might very well be explained by new forms of hotel supply (such as hostels) or the enlarged pipeline of new supply. The largest slice of hotel supply, in Porto, is concentrated in the Baixa (downtown) and the Avenida da Boavista: old and new city centres. These two area concentrate evenly, over 4% of total room supply. The new areas of the Estádio do Dragão and Hospital São João, already account for more than 1% of the total supply. The remaining supply is spread, evenly, through neighboring cities (Matosinhos, Maia, V. N. Gaia) and other areas further away from the city centre. Business hotels are the predominant type in a varied, although residual in some classes), supply. Business hotels, with city centre hotels, in a mid-level range, highlight Porto s vocation to a city break kind of tourism. Furthermore, city centre and business hotels account for more than half of total room supply. ROOM SUPPLY (HOTEL CLASSIFICATION) Over the last two years, new openings were predominantly concentrated in city centre hotels and low-cost hotels. There were almost no new business hotels, but new supply included new forms of supply, such as theme hotels. Motel Transient Low Cost Beach Business Porto s transport infra-structures make it a crossing point between the Centre and the North of Portugal. Thus, transient hotels, located close to major highways, remain quite important in total supply, reaching almost 1%. Theme Luxury Leisure Centre At last, motels which also account for an interesting slice of total room supply, quite close to 5% of total. 9 COLLIERS INTERNATIONAL

PORTO HOTEL MARKET REPORT 211 PORTUGAL HOTEL SUPPLY Hotel Supply MANAGEMENT No Chain International Chain National Chain MANAGEMENT Management works as an indicator of the level of professionalism and internationalisation of the business. More mature markets separate management and ownership, keeping the latter to specialized entities, for a long period of time (rarely under 15 years). In Porto, although a quarter of total room supply is being managed by international chains, over 4% of total room supply remain brandless. OWNERSHIP National International National Group Hotel International Group Hotel National Group OWNERSHIP Almost half of the hotel owners in Porto are national private entities, with no connection to corporate groups. Such a distribution, is an indicator of a large component of smaller hotels, old, generally managed as a familiar business in an old-fashion way. On the other hand, and an indicator of a higher level of professionalism, hotels owned by private national hotel-associateroom supply. groups, in Porto, already account for a third of the total BRANDS SUPPLY DISTRIBUTION FÉNIX ACCOR HOTI TURILIMA VILA GALÉ 776 ROOMS 755 ROOMS 388 ROOMS 353 ROOMS 292 ROOMS Brand variation is quite illustrative in this fact: considering, exclusively, hotel units part of hotel chains, it is possible to identify over 3 different brands. Adding hotels without a chain to those 3 brands and a large figure is returned. The largest management brand in Porto are the hotels Fénix, with little under 8 rooms, followed closely by Accor Hotels (close to 75 rooms). Ibis brand, in Accor Hotels offer 49 rooms in Porto. Grupo Hoti has little under 4 rooms, spread by Tryp and Star Inn units and Turilima, close to 35 rooms, with the Axis brand. Vila Galé and Sheraton have more than 25 rooms, although concentrated in a single hotel. Hostels World tourism started spreading largely driven by a low-cost demand slice (looking for low cost accommodation). Under these circumstances, hostels became more important, offering cheap, but creative, accommodation and providing a global meeting point to travellers from all around the world. Porto followed suit and driven by the airport growth, hostels started spreading through all the city centre. Until 29, supply was still insipient, but in 21, 8 new units opened, doubling the city s total supply. New units kept opening in 211, and several more are still in the pipeline. The transformation of old existing buildings has been the most used form to open a hostel. Sometimes, old inns or guest houses were regenerated into hostels, with a determined theme and an appealing and modern design. BEDS SUPPLY (HOSTELS) total 2 15 new 7 6 5 4 Only one of Porto s hostels is a part of a hotel chain. The remaining hostels are privately owned, generally by a family, that started with the regeneration of an old building, not too big, and a strong investment in decor and design. Management stays in the family and the hostel is run in a way to bond with the guests, giving a family environment to the hostel. 1 5 3 2 1 This familiar way to run the business, is many times, a personal investment, in ma way that elevates the service levels, driving Porto s (and Portuguese) hostels to the top of international rankings (e.g., www.hostelworld.com). The success of this business is strongly correlated with the placement of the hostel in the internet and how it is presented to potential customers. Demand is, generally, international and low income. 1 COLLIERS INTERNATIONAL

PORTO HOTEL MARKET REPORT 211 PORTUGAL FUTURE SUPPLY 212 NEW SUPPLY RIO DOURO 5 * 42 ROOMS FONTE DA VINHA 5 * 34 ROOMS CARRÍS RIBEIRA 4 * 91 ROOMS SOARES DOS REIS 3 * 17 ROOMS IBIS BUDGET 1 * 95 ROOMS 213 NEW SUPPLY OPORTO VINTAGE 5 * 147 ROOMS INSPIRA FLORES 4 * 6 ROOMS Future Supply PIPELINE In 211, the economic and financial crisis did not show in working hotels. However, some hotel in credit access. Indeed, credit restrictions and financing inherent problems, which are now a major factor in the national economic activity, makes it very difficult to forecast which hotels will, in the end, open, over the next two years. Hotel opening projections, sometimes having even reached for international management chains, plans or intended planning, are very easy to find. Colliers International had to separate units with, apparently, most of the feasibility done, from the ones, still lacking physical, legal or financial feasibility. BOM SUCESSO 2 * 83 ROOMS In conclusion, it was possible to identify 9 new units that will, potentially, open in the next two years. HILTON TRINDADE 4 * 124 ROOMS Apart from these, and due to the dynamics of the city, it is possible to pinpoint over 5 land parcels or buildings to be regenerated, publicly known. openings were postponed, highlighting financial difficulties, mostly PIPELINE (NEW ROOMS) new supply 45 3 15 forecasted supply It is important to state that this is a speculative subject, where it is not difficult to find a much bigger number than the 9 units referred. In fact, Colliers International estimates that Porto has a pipeline of more than 4. rooms with a plan or a public statement. From those 4., around 65 rooms may, under a different economic perspective, remove the obstacles anticipated to block its development (usually, financing). Obviously, from the remaining, some will never get to the opening day and for many others, not even a sketch will be drawn. 29 21 211 212 213 Investment INVESTMENT MARKET INVESTMENT 375. regeneration 3. new building 225. 15. 75. 3 * 4 * 5 * Hotel transactions, in Portugal, are scarce and concentrated in Lisbon or in Algarve. Usually, selling involves only hotels going through hard times or, alternatively, units performing well, being sold to Investment Funds. Once a small market, today, it is almost non existent. In Porto, apart from one-off deals (one of the last included a portfolio sale, including several hotels), hotel investments are restricted to the regeneration of old buildings, transforming them in new, modern and functional hotels. This is the way a hotel opens in Porto. Cost forecast of such a regeneration is key to the success of the business. However, most estimates fall short, because these are a lot more difficult than estimating the cost of a new building. Risks involved are high, elevating contingencies to unimaginable figures. This is the context to hotel investment in Porto. Therefore, investment values are quite volatile. Colliers International estimates it is very difficult to open a 5 star hotel, in Porto, with an investment value lower than 3. euros/room, in the city centre. On the contrary, it seems possible to open a 4 star hotel with an investment value little over 1. euros/room. 11 COLLIERS INTERNATIONAL

PORTO HOTEL MARKET REPORT 211 PORTUGAL COLLIERS RESEARCH 512 offices in 61 countries in 6 continents U. S. America: 125 South America: 18 Asia and Pacific: 214 EMEA: 117 Portugal: 3 $1.5 billion in annual income 978,6 million m² under management More than 12,5 professionals PORTUGAL: Colliers International Alameda Jardins d Arrábida, 1168 44-478 Vila Nova de Gaia Largo das Palmeiras, 9 15-168 Lisboa Marina Forum Avenida Arreaga, 77 2º sala 22 94-533 Funchal Portugal TEL +351 22 772 85 19 +351 21 35 58 41 FAX +351 22 772 85 11 EMAIL pi.cn@grupoipg.pt Colliers Research Services Group is recognized as a knowledge leader in the commercial real estate industry, providing clients with valuable market intelligence to support business decisions. Colliers research analysts provide multi-level support across all property types, ranging from data collection to comprehensive market analysis. In Portugal, Colliers Research Department, regularly collect and update data on key real estate metrics. These data are then worked internally, following the international adequate proceedings, set inside the universe of the Colliers International Reseacrh Services Group. COLLIERS INTERNATIONAL HOTELS Brokerage: Buying and Selling of Hotels; Mergers and Acquisitions; Operator Selection; Negotiation and Renewal of Management Contracts. Corporate Services: Corporate Finance; Debt and Equity Placement; Mergers and Acquisitions. Consulting: Development of the Hotel Concept and Strategy Definition of the Hotel as Touristic Destination; Market and Feasibility Studies; Valuations; Corporate finance Consulting; Development Advisory; Operational Analysis; Asset Management. Research: Market Studies, Trend Analysis, Investment Market Analysis. GLOSSARY Hotel: Unit whose main activity consists in providing accommodation and other complementary or supporting services, with or without restaurant, in exchange for a payment. Colliers only considers units with more than 3 rooms (with a private bathroom). Hotels classes go from 1 to 5 stars. Portuguese star rating is provided by the Direcção Geral do Turismo (Tourism Office) and Portugal has stayed, thus far, outside the European standardisation system HOTREC. Overnights: When an individual stays in an accommodation providing establishment, for period between midday of one day and midday of the following day (INE, National Office of Statistics). Average Stay: Relationship between overnights and guests originating those overnights, in a certain period, under a supply perspective (INE, National Office of Statistics). Occupancy Rate: In this variable, sold rooms in a certain period are computed assessing the average efficiency of the hotel. The total number of rooms sold is divided by the total number of rooms available for sale, in the hotel, in a certain period. Average Rack Rate (ARR): The Average Rack Rate results from the division of total income generated by the hotel, in a certain period, by the total number of rooms, available for sale. The average sold room rate might also be calculated, replacing the total number of rooms, in the denominator, by the total number of sold rooms. This variable is also known as the Average Daily Rate. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. REVPAR (Revenue per Available Room): This is one of the most important indicator when analysing a hotel performance. It consists in crossing total income obtained per room and the hotel s occupancy rate, also per room. The product of both variables, returns the REVPAR in a certain period. www.colliers.com/markets/porto

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