Foreign direct investment in the accommodation sector in Portugal

Surprisingly, even though the number of studies addressing Foreign Direct Investment (FDI) is large, a very limited number of them are applied to the tourism industry. Furthermore, none of them examines FDI in the Portuguese tourism industry. However, as important as identifying and analyzing the reasons for travelling and the reasons that influence tourists visiting Portugal, is to identify the pull factors that influence foreign investors to choose the Portuguese accommodation sector. Although much has been written to date on the attractiveness of Portugal as a tourist destination, there were no studies on the attractiveness of Portugal in attracting foreign investment to the tourism sector. The current study intends to fill this gap by identifying the key factors influencing FDI in the Portuguese accommodation sector. With this purpose, a theoretical model was developed which was validated through semi-structured exploratory interviews and questionnaire surveys applied to foreign investors exploiting accommodation units in mainland Portugal. Fifty three questionnaires were considered valid, representing 63.9% of the universe of foreign investors in Portuguese accommodation sector and that account for the exploitation of 20.999 beds. The results obtained indicate that Portugal’s geographical location, its image/brand as a tourist destination and the Portuguese tourism offer are considered the key factors influencing FDI. This study also identifies that the main barriers to FDI are bureaucracy, tax burden and Portugal’s current economic situation.