What commercial potential do you see for the new generation of Algarve resorts e.g. Ombria and Palmares?
Trends and desires of buyers and investors of second homes in luxury resorts have changed in the last ten years. Today, it’s all about unique and exciting experiences as well as 5* service. The new generation of resorts in the Algarve must now focus on providing a wealth of experiences to suit all ages and types, from families to couples. Those that get the masterplanning correct will enjoy financial success, through high occupancy year-round and increasing hotel and rental rates. The rental market is booming right now so buyers and developers have an opportunity to capitalise on this. Most buyers today expect rental income to more than cover the cost of ownership so resorts that can achieve 4% net yield or above (on smaller units), and at least 2% net yield on larger properties, will fare well.
One of the fastest growing sectors is wellness. Six Senses Duoro Valley (not selling residences) is evidence that a resort no longer needs to be coastal or within a thirty-minute drive from the airport. They have created a destination and as a result, guests from around the world fill the hotel throughout much of the year. Projects such as Ombria, thirty minutes inland, north of Faro airport, will include a Viceroy hotel with branded apartments, and numerous non-branded villas overlooking a beautifully designed golf course and surrounding hills. However, they plan to offer much more than just golf. A world-class spa, sports facilities, restaurants and activities outside the resort, from cycling to village tours, will make Ombria an attractive option for everyone and a means of escaping the hectic urban life back home.
Many of the existing resorts have focused too much attention on golf. Only 30-40% of home owners within a golf resort play the game and fewer people each year have time to play 18-holes. The new generation of resorts will have a central heart that brings people together but also attracts visitors from outside, creating a buzz even in low season…and therefore greater revenue for the developer.
How should the Algarve position and differentiate itself against other holiday home destinations?
The Algarve should position itself as an attractive, less densely developed, alternative to other holiday home destinations, e.g., southern Spain, that offers authentic experiences and a better lifestyle. This means not only marketing the Algarve as a leading golf destination but as a place to retreat to and escape from stress at home. It’s well connected with daily flights from most European cities, making it highly accessible.
The Portuguese golden visa is one of the most attractive of its type worldwide and with non-habitual residency providing pension and income tax benefits, the Algarve is certainly becoming the best place in Europe to invest or retire to.
Which non-traditional markets or market segments should Algarve developers be considering?
As mentioned, developers should focus on wellness, a rapidly growing market. Wellness real estate is the new ultra-luxury and is now a $134 billion global industry, which is growing by 6.4% per year. It’s not just about spa treatments. Cosmetic surgery, yoga, extreme sports holidays and organic and healthy dining are all areas of growing interest amongst buyers. Resorts that grow their own organic produce are proving popular (Ombria plans to do just that). Developers therefore need to appeal to a new generation of healthy foodies.