Sun, sea and techs in Madeira

Madeira, the main island of the eponymous archipelago, is just 56 kilometres long and 21 kilometres wide, but enjoys substantial international appeal. In 2018, it attracted 4 million visitors, a significant number for an island of 254,000 inhabitants, and for the sixth time since 2013 Madeira was named Europe’s leading island destination in the World Travel Awards.

Renowned for its staple exports of bananas, passion fruit, wine and fish, Madeira is located in the Atlantic Ocean, off Africa’s north-west coast, yet less than four hours from London by plane. Its diverse landscape includes mountains and ocean, tropical greens and volcanic browns, cloudy mists and blue skies. While the main island's beaches are made of black sand or pebbles, neighbouring Porto Santo has 9 kilometres of sandy coastline, and is set to become one of the world’s first fossil fuel-free islands. 

Growth story

Impressively, Madeira has enjoyed uninterrupted GDP growth since mid-2013, while unemployment has dropped from a high of 15.9% in 2015, to 7% in 2019, according to Patricia Dantas, Madeira’s regional assistant director of the economy. 

“There’s a huge growth in confidence in Madeira’s market. Our debt-to-GDP ratio is under 100% for the first time in a long time. The regional government took an average of 1080 days for local payments in 2012; now it’s only 61 days,” she adds. 

Tourism is a key sector in Madeira, accounting for about 25% of GDP in 2018, and employing about 17% of the working population, according to Pedro Calado, vice-president of Madeira’s regional government. Last year saw 3.3 million tourists arrive by plane (a 45% increase since 2007), and 540,000 arrive by boat (a 13% increase since 2013), while hotels have had an impressive 85% occupancy rate over the past three years, says Mr Calado. 

High-end target

Although revenue increased in the tourist accommodation sector in Madeira in 2018, there was a slight drop in overnight stays according to the Regional Directorate of Statistics of Madeira. Nearly 80% of hotel rooms in Madeira are booked online, and Booking.com registered a 15% decrease in sales in 2018, according to Manuel Saldanha, sales director at Madeira TIP Investments. 

“We expect tourist numbers to go down by 25% over the next few years. Countries that had security problems during the past 10 years – Tunisia, Turkey, Algeria, Egypt – are now coming up strong and are dumping prices,” he adds. 

However, since these resurgent countries attract mainly low-budget tourists – which is more likely to hit Madeira’s cheaper Airbnb accommodation – there has been less impact on the hotel industry, which is composed almost entirely of four- and five-star establishments, according to Mr Saldanha.

“Our hotels may lose some numbers over the next three years, but will not drop lower than a 60% occupancy rate. The opportunity for [upmarket] hotel investment is still very ripe. We’re very popular for Brits, Germans and Scandinavians. This demographic also buy houses in Madeira. We’re selling close to 200 a year, valued at €500,000 to €1m, and that number has grown over the past three years,” he adds.

Madeira prefers quality tourism over mass tourism, but with 30,000 tourist beds on the island, there is room for more tourists, according to Mr Calado. With this in mind, the new five-star Royal Savoy Hotel recently opened with 172 rooms, following €40m of investment. The complex boasts substantial events space, an area of tourism that Madeira is keen to expand as it hosts events in the areas of culture, business, academia, botany and sports, such as the 2020 European Bridge Championship. 

Tech bridge 

Following the Portuguese tech boom, Madeira’s young but fast-growing tech sector is exporting its services beyond its small domestic market. The University of Madeira, which offers courses in engineering, mathematics, nanochemistry, health tech and interactive tech, is fuelling this talent pool, and boasts the world-class Madeira Interactive Technologies Institute, founded by US-based Carnegie Mellon University.

Startup Madeira, a government-led incubator for SMEs, attracted 53 registrations from 19 countries in 2019’s Madeira Startup Retreat, which saw tourism start-ups use the island as a living lab for product testing. In recent years, the incubator has operated at full capacity and facilitated the success of numerous companies, such as WalkMe Mobile Solutions, a phone-games developer with 30 million users.

Portugal’s largest telecommunications service provider, Altice Portugal (owned by multinational Altice Group), recently established an innovation lab in the municipality of Ribeira Brava. Alcino Lavrador, general manager of Altice Labs, says: “We are energising the local tech ecosystem and positioning [Madeira] as a key driver in terms of talent attraction, knowledge and innovation exports. The young and dynamic population, complemented by a floating tourist population, provides the right conditions to become the future hub for projects [within tourism tech and smart cities].” 

ACIN iCloud Solutions is also based in Ribeira Brava, where it employs about 200 people working on cloud computing solutions. Madeira’s tax regime allows tech companies that export their services to receive a reduced corporate tax rate of 5%, an initiative that has attracted the likes of tech veteran WinZip.