Executive Summary

Portugals travel and tourism industry saw recovery in 2004. This followed a decrease in 2002/2003 when there was a downturn in global travel industries, which had a larger negative effect on domestic tourism. This, combined with an underperforming domestic economy and the outbreak of the conflict in Iraq, held back growth in the travel industry.

Although the economy recovered in 2004 witnessing GDP growth of 1%, consumer confidence continued to be affected by salary reductions and the prospect of higher unemployment. This led to lower levels of holiday taking by the Portuguese and lower average spending per trip.

The EUFA Euro 2004 held in Portugal during June and July 2004 had an overall positive effect on the depressed travel and tourism industry and on the final results over the review period. However, this sporting event and the success of the Rock in Rio music festival appear to have disguised a negative longer term trend. This trend has been developing since 2001 when there has been a decline in the numbers of key tourist arrivals. Such consumers have chosen cheaper sun and beach alternative destinations in the Mediterranean, Balkans and Eastern Europe.

The travel accommodation industry continues to consolidate through a combination of acquisitions and organic growth.The slowdown in global tourism over most of the review period, however, has not translated into lower rates of investments in hotels or other types of accommodation. Several luxury hotels and resort developments were built by domestic and international companies.

Despite a strong performance in 2004 with a rise of 7% in terms of sales, the value of the transportation industry decreased by 6% in current value terms over the review period to reach EUR2 billion in 2004. This was mainly the result of the slowdown in both incoming and outgoing tourist numbers since 2001.

The negative trend in car rental value sales, which began in 2001, was only reversed by a good performance in 2004. This was the result of the higher influx of tourists following the Rock in Rio music festival in May and the Eurpean Football Championships in June. Apart from this exceptional year, the decreasing trend in the number of key visitors such as Germans, Spanish and British continue to put pressure on rental operatorssales in the leisure airport industry.

The travel retail industry which had been relatively fragmented, experienced a period of consolidation as a result of the downturn in the travel industry. A small number of key players merged and/or acquired outlets to increase their industry share. The industry also became progressively more vertically integrated, with the key travel agency chains also functioning as tour operators and launching on-line travel agents.

There was increased investment in the tourism infrastructure away from the sun and beach areas, mainly focusing on Northern Portugal (city of Porto) and the areas near the Douro river. The objective is to provide tourists with more choice and added value in order to attract higher-spending visitors.

The increase in the number of city breaks over the last two years of the review period, and the rising importance of art galleries, casinos and national parks boosted sales growth in key aspects of tourist attractions. However, visitor numbers over the review period decreased by 3%, although there was a very slight upswing in 2004.

The travel and tourism industry is not expected to see a sustained recovery in its key areas until 2006. It remains to be seen whether the fall in visitor numbers, especially those from Germany and the UK, will be reversed once Germany sees sustainable recovery in disposable income and the pound recovers against the euro.

Incoming tourist receipts are expected to grow by 25% in constant value terms over the forecast period. It is expected that government investment in the infrastructure and tourist attractions will help to attract visitors with relatively higher spending power. This will lessen the countrys high depedency on the sun and beach themed holidays. The modernisation of Portugals travel accommodation units should also assist this development.

The Euro 2004 football championship held in stadiums across Portugal precipitated large-scale investment in Portugals travel and tourism infrastructure, most notably road building around the major cities and expansion of the three key international airports. Thus the country is relatively well prepared to take advantage of the expected recovery in the tourism industry in 2006.

1. EXECUTIVE SUMMARY

2. OPERATING ENVIRONMENT

2.1 GDP

• Table 1 GDP 1999-2004

2.2 Disposable Income

• Table 2 Disposable Income 1999-2004

2.3 Leisure Expenditure

• Table 3 Consumer Expenditure on Leisure 1999-2004

3. INDUSTRY ISSUES

3.1 Political and Legislative Environment

3.2 Terrorism and Security

3.3 Sustainable Tourism

3.4 Positive Growth Factors

• Summary 1 Positive Growth Factors

3.5 Negative Growth Factors

• Summary 2 Negative Growth Factors

4. DEMAND FACTORS

4.1 Leave Entitlement

• Table 4 Paid Holiday and Public Holidays 2004

4.2 Holiday Taking

• Table 5 Levels of Holiday Taking 1999-2004

15. Demographics

• Table 6 Holiday Taking by Demographic Groupings 1999-2004

16. Length of Trip

• Table 7 Holiday Taking by Length of Trip 1999-2004

17. Seasonality

• Table 8 Month in which Holidays Are Taken 2004

5. TOURISM PARAMETERS

5.1 Incoming Tourism Receipts

• Table 10 Incoming Tourism Receipts % Growth: 2000-2004
• Table 9 Incoming Tourism Receipts: 1999-2004

5.2 Outgoing Tourism Expenditure

• Table 11 Outgoing Tourism Expenditure: 1999-2004
• Table 12 Outgoing Tourism Expenditure % Growth: 2000-2004

5.3 Balance of Tourism Payments

• Table 13 Balance of Tourism Payments: Value 1999-2004

22. Number of Arrivals

• Table 14 Total Arrivals: 1999-2004

23. Mode of Transport

• Table 15 Arrivals by Mode of Transport: 1999-2004
• Table 16 Arrivals by Mode of Transport: % Breakdown 1999-2004

24. Purpose of Visit

• Table 17 Arrivals by Purpose of Visit: 1999-2004
• Table 18 Arrivals by Purpose of Visit: % Breakdown 1999-2004

25. Country of Origin

• Table 19 Arrivals by Country of Origin: 1999-2004
• Table 20 Arrivals by Country of Origin: % Breakdown 1999-2004

26. Per Capita Expenditure

• Table 21 Per Capita Expenditure per Arrival: 1999-2004

27. Number of Departures

• Table 22 Total Departures: 1999-2004

28. Mode of Transport

• Table 23 Departures by Mode of Transport: 1999-2004
• Table 24 Departures by Mode of Transport: % Breakdown 1999-2004

29. Purpose of Visit

• Table 25 Departures by Purpose of Visit: 1999-2004
• Table 26 Departures by Purpose of Visit: % Breakdown 1999-2004

30. Destination

• Table 27 Departures by Destination: 1999-2004
• Table 28 Departures by Destination: % Breakdown 1999-2004

31. Per Capita Expenditure

• Table 29 Per Capita Expenditure per Departure: 1999-2004

32. Number of Trips and Expenditure

• Table 30 Total Number of Domestic Trips: 1999-2004

33. Trips by Mode of Transport

• Table 31 Domestic Trips by Mode of Transport: 1999-2004
• Table 32 Domestic Trips by Mode of Transport: % Breakdown 1999-2004

34. Trips by Destination

• Table 33 Domestic Trips by Destination 1999-2004
• Table 34 Domestic Trips by Destination: % Analysis 1999-2004

5.17 Tourism Spending

• Table 35 Spending on Tourism 1999-2004
• Table 36 Spending on Tourism: % Breakdown 1999-2004

36. Method of Payment

• Table 37 Method of Payment for Tourism Spending: % Breakdown 2003

6. TRAVEL ACCOMMODATION

6.1 Market Size

• Table 38 Travel Accommodation Market 1999-2004
• Table 39 Travel Accommodation Market % Growth 1999-2004

6.2 Sales by Sector

• Table 40 Travel Accommodation Value Sales by Sector: Value 1999-2004
• Table 41 Travel Accommodation Value Sales by Sector: % Value Breakdown 1999-2004

6.3 Outlets by Sector

• Table 42 Travel Accommodation Outlets by Sector: Units 1999-2004
• Table 43 Travel Accommodation Outlets by Sector: % Volume Breakdown 1999-2004

6.4 Hotels by Region

• Table 44 Hotels, Rooms and Beds by Region 2004

6.5 Hotels by Star Ratings

• Table 45 Number of Star Rated Hotels by Region 2004

6.6 Hotels by Ownership

• Table 46 Hotel Sales by Independent vs Chained Outlets: Value 1999-2004

6.7 Internet Transaction Trends

• Table 47 Travel Accommodation Internet Transactions Sales: Internet Transaction Value 1999-2004

6.8 Emerging Products

46. Mergers and Acquisitions

• Summary 3 List of Mergers and Acquisitions 2002-2004

47. Revenue Rankings

• Table 48 Key Players by Revenue 2003/2004

48. Market Share

• Table 49 Hotel Companies by Market Share 2001-2004

49. RevPAR

• Table 50 Key Hotel Players by RevPAR 2003/2004

6.13 Forecast Sales by Sector

• Table 51 Forecast Travel Accommodation Sales by Sector: Value 2004-2009

6.14 Forecast Outlets by Sector

• Table 52 Forecast Travel Accommodation Outlets by Sector: Units 2004-2009

7. TRANSPORTATION

7.1 Market Size

• Table 53 Transportation Market 1999-2004
• Table 54 Transportation Market % Growth 1999-2004

7.2 Sales by Sector

• Table 55 Transportation Sales by Sector: Value 1999-2004
• Table 56 Transportation Sales by Sector: % Value Breakdown 1999-2004

7.3 Airline Capacity and Utilisation

• Table 57 Airline Capacity by Type 1999-2004
• Table 58 Airline Utilisation by Type 1999-2004 Table 59 Airline Utilisation by Type : % Breakdown 1999-2004

7.4 Airline Sales by Seat Class

• Table 60 Airline Volume Sales by Seat Class 1999-2004
• Table 61 Airline Volume Sales by Seat Class: % Breakdown 1999-2004

7.5 Airline Sales by Distance

• Table 62 Airline Volume Sales by Distance: % Breakdown 1999-2004

7.6 Internet Transaction Trends

• Table 63 Transportation Sales: Internet Transaction Value 1999-2004

59. Revenue Rankings

• Table 64 Key Players by Revenue 2003/2004

60. Passengers Carried

• Table 65 Key Players by Numbers of Passengers Carried 2003/2004

61. Market Share

• Table 66 Airline Companies by Market Share 2001-2004

7.10 Forecast Sales by Sector

• Table 67 Forecast Transportation Sales by Sector: Value 2004-2009

8. CAR RENTAL

8.1 Market Size

• Table 68 Car Rental Market: 1999-2004
• Table 69 Car Rental Market % Growth: 1999-2004

8.2 Fleet Size and Number of Operators

• Table 70 Structure of Car Rental Market 1999-2004

8.3 Sales by Sector and Location

• Table 71 Car Rental Sales by Sector and Location: Value 1999-2004
• Table 72 Car Rental Sales by Sector and Location: % Value Breakdown 1999-2004

8.4 Rental Duration

• Table 73 Car Rental Average Duration by Sector 1999/2004
• Table 74 Average Car Rental Duration: % Breakdown 1999/2004

8.5 Time of Booking

• Table 75 Time of Booking: % Breakdown 2004

8.6 Internet Transaction Trends

• Table 76 Car Rental Sales: Internet Transaction Value 1999-2004

8.7 Emerging Products

71. Mergers and Acquisitions

• Summary 4 List of Mergers and Acquisitions 2002-2004

72. Revenue Rankings

• Table 77 Key Players by Revenue 2003/2004

73. Fleet Size

• Table 78 Key Players by Size of Fleet 2001-2004

74. Average Daily Rate

• Table 79 Key Players by Average Daily Rate for Car Hire 2003

75. Market Share

• Table 80 Key Players by Market Share 2001-2004

8.13 Forecast Sales by Sector and Fleet Size

• Table 81 Forecast Car Rental Sales by Sector: Value 2004-2009
• Table 82 Forecast Car Rental Fleet Size 2004-2009

9. TRAVEL RETAIL

9.1 Market Size

• Table 83 Travel Retail Market: 1999-2004
• Table 84 Travel Retail Sales % Growth: 2000-2004

9.2 Outlets by Sector

• Table 85 Travel Retail Outlets by Sector: Units 1999-2004
• Table 86 Travel Retail Outlets by Sector: % Volume Breakdown 1999-2004

80. Services

• Table 87 Travel Agency Value Sales by Service: % Breakdown 1999-2004

81. Type of Holiday and Destinations

• Table 88 Travel Agency Value Sales by Type of Holiday: % Breakdown 1999-2004
• Table 89 Travel Agency Value Sales by Destination: % Breakdown 1999-2004

82. Exchange Services

• Table 90 Travel Agencies Offering Exchange Services 1999-2004

83. Source of Sale

• Table 91 Tour Operator Value Sales by Source of Sale: % Breakdown 1999-2004

84. Type of Holiday and Destinations

• Table 92 Tour Operator Value Sales by Type of Holiday: % Breakdown 1999-2004
• Table 93 Tour Operator Value Sales by Destination: % Breakdown 1999-2004

85. Sales by Outlet and Type

• Table 94 Exchange Service Value Sales by Outlet: % Breakdown 2003
• Table 95 Exchange Services Value Sales by Currency vs Travellers Cheques: % Breakdown 2003

9.9 On-line Travel Agencies

• Table 96 Travel Retail Sales: Internet Transaction Value 1999-2004

9.10 Emerging Products

88. Mergers and Acquisitions

• Summary 5 List of Mergers and Acquisitions 2002-2004

89. Revenue and Market Share

• Table 97 Travel Agents: Revenue Rankings 2003/2004
• Table 98 Travel Agencies: Market Share 2001-2004

90. Revenue and Market Share

• Table 100 Tour Operators: Market Share 2001-2004
• Table 99 Tour Operators: Revenue Rankings 2003/2004

9.14 Forecast Sales and Outlets

• Table 101 Forecast Travel Retail Value Sales: 2004-2009
• Table 102 Forecast Travel Retail Outlets by Sector: Units 2004-2009

10. TOURIST ATTRACTIONS

10.1 Market Size

• Table 103 Tourist Attractions Market: 1999-2004
• Table 104 Tourist Attractions Market % Growth: 1999-2004

10.2 Sales by Sector

• Table 105 Tourist Attractions Sales by Sector: Value 1999-2004
• Table 106 Tourist Attractions Sales by Sector: % Value Breakdown 1999-2004

10.3 Visitors by Sector

• Table 107 Tourist Attractions Visitors by Sector: 1999-2004
Table 108 Tourist Attractions Visitors by Sector: % Breakdown 1999-2004

10.4 Internet Booking Trends

10.5 Emerging Products

98. Visits

• Table 109 Major Tourist Attractions by Visitors 2002-2004

10.7 Forecast Sales and Visitors by Sector

• Table 110 Forecast Tourist Attractions Sales by Sector: Value 2004-2009
• Table 111 Forecast Tourist Attractions Visitors by Sector: 2004-2009

11. KEY STRATEGIC ALLIANCES

11.1 Trends

• Summary 6 Key Strategic Alliances 2000-2004

12. GROWTH COMPANY PROFILES

12.1 Pestana Hotels & Resorts SA

• Summary 7 Pestana Group : Key Facts
• Summary 8 Pestana Group : Summary of Key Events 1999-2004 Table 112 Pestana Group : Financial Summary 1999-2004

12.2 TAP-Air Portugal SA

• Summary 9 TAP-Air Portugal SA : Key Facts
• Summary 10 TAP-Air Portugal SA : Summary of Key Events 1999-2004 Table 113 TAP-Air Portugal SA : Financial Summary 1999-2004

12.3 Air Luxor SA

• Summary 11 Air Luxor SA : Key Facts
• Summary 12 Air Luxor SA : Summary of Key Events 1999-2004 Table 114 Air Luxor SA : Financial Summary 1999-2004

12.4 Avis Portugal (Sovial SA)

• Summary 13 Avis Portugal (Sovial SA) : Key Facts
• Summary 14 Avis Portugal (Sovial SA) : Summary of Key Events 1999-2004 Table 115 Avis Portugal (Sovial SA) : Financial Summary 1999-2004

12.5 Grupo Espirito Santo Viagens SA

• Summary 15 Grupo Espirito Santo Viagens SA : Key Facts
• Summary 16 Grupo Espirito Santo Viagens SA : Summary of Key Events 1999-2004 Table 116 Grupo Espirito Santo Viagens SA : Financial Summary 2002-2004

13. FUTURE OUTLOOK

13.1 Market Opportunities

• Summary 17 Opportunities for Growth and Investment

13.2 Tourism Receipts and Expenditure

• Table 117 Forecast Incoming Tourism Receipts: 2004-2009
• Table 118 Forecast Outgoing Tourism Expenditure: 2004-2009

13.3 Balance of Payments

• Table 119 Forecast Balance of Tourism Payments: Value 2004-2009

13.4 Number of Arrivals

• Table 120 Forecast Visitor Arrivals: 2004-2009

13.5 Number of Departures

• Table 121 Forecast Visitor Departures: 2004-2009

13.6 Travel and Tourism Markets

• Table 122 Forecast Sales by Travel and Tourism Markets: Value 2004-2009

13.7 Developments in Internet Transaction Sales

• Table 123 Forecast Sales in Travel and Tourism Markets: Internet Transaction Value 2004-2009

14. DEFINITIONS