In the past six months, almost 2,000 “AL” enrolments have been wound up. Many owners have stopped letting but failed to cancel their registrations due to capital gains tax liabilities. In the first quarter of 2019, new “AL” sign-ups fell nationally by 40% and by 60% in Lisbon. These numbers are likely to be understated. In total, the capital currently counts with 18,000 Local Lodging Establishments. Nationwide, there are approximately 83,000. 2020 could prove to be a year of mass exodus.
Insurance providing civil liability coverage guaranteeing the property against damages caused by guests and third parties is required of all operators responsible for “AL” services. The minimum capital per claim is €75,000. Entities operating “AL” units that are part of a condominium must also have coverage guaranteeing property damage caused by fire in or from the “AL” unit. These insurances are mandatory for all Local Lodging establishments registered after 21 October 2018. Their absence is grounds for cancellation of “AL” registrations. Units registered before this date have up to two years to meet the requirements.
Since the approval of the legislation amending the rules for Local Lodging, 836 new units have been opened in Lisbon and 297 in Porto. President Marcelo Rebelo de Sousa has already signed the bill which should be published soon, coming into force 60 days after.
In June of 2018, 68,310 Local Lodging registrations exist as compared to 23,136 in 2015, an increase of almost 300% in three years. Over the same period, tax revenues have more than doubled. 73% of “AL” accommodations are outside Lisbon and Porto, with over a third in the Algarve.
Beginning 01 July 2017, any website advertising local accommodations in Portugal must display the corresponding AL registration number. Failure to do so will lead to fines from a minimum of €125 to maximum of €32,500 as mandated in Decree-law nº80/2017.
Excess competition coupled with controversies surrounding Local Lodging are beginning to affect prices and occupancy rates. While registrations were still up in 2016, the pace has diminished substantially which slowed from 200% in 2015 to just 8% last year.