Why resorts offer guaranteed returns

Even if you’re not actively searching for a holiday home, the various billboards across the Algarve likely caught your eye: “Touristic Real Estate with a Guaranteed Return.”

By Advertiser, in Property, Business · 11 Jul 2025, 07:31 · 1 Comments

Credits: Supplied Image; Author: Client;

This promise of a secure income stream often sparks curiosity, leading many to wonder why such an offer is so prevalent in the market.

The answer lies in the inherent challenges of launching a new rental operation. Touristic real estate is typically sold during or shortly after construction. The initial years of any rental business are notoriously difficult and less profitable. Operators face the uphill battle of training staff, forging relationships with tour operators, and accumulating positive organic reviews on booking platforms. This nascent stage often results in minimal or no income, a significant deterrent for private investors who prioritize the financial return of their purchase, especially if they’re relying on mortgage financing.

This is where the “guaranteed return” emerges as a clever solution. By factoring a guaranteed return for the initial years into the purchase price, developers effectively mitigate the psychological and liquidity hurdles for potential buyers. This strategy has become so commonplace that it’s now a market standard. Even well-established resorts with thriving rental operations continue to offer guaranteed returns, simply because it’s what buyers expect.

Consider the example of Vale da Lapa, a resort that exemplifies a mature and highly successful rental operation. Boasting an impressive 9.2/10 review score on Booking.com from over 1,000 reviews, its occupancy rates are equally remarkable. While the Algarve’s seasonality typically leads quality resorts to target an average annual occupation of around 60%, Vale da Lapa closed 2024 with an outstanding 78% average occupancy. This exceptional performance is a testament to years of optimisation and a well-established operation.

Despite its strong performance, Vale da Lapa still offers guaranteed returns on its touristic real estate. The primary reason, again, is market expectation. However, the resort’s established success provides it with a unique advantage: the flexibility to offer a wider range of guaranteed return packages than is typical. Buyers can choose from five different models, catering to diverse needs and preferences.

For instance, the “investor model” is designed for those solely interested in the rental income without personal use of the property. On the other end of the spectrum, there are options for individuals who wish to spend extended periods in their holiday home, to escape colder winters, while still generating income during peak seasons. In between, various packages cater to specific groups like golfers or families with school-aged children.

In conclusion, guaranteed returns are firmly entrenched in the world of touristic real estate. However, for discerning buyers, the most crucial factor should always be the underlying strength of the rental operation. Ultimately, that’s what your investment hinges upon. The guarantee might attract you, but the long-term success of the resort is what truly secures your investment.

For more information:

https://valedalapasales.com/

valedalapasales@gmail.com

Disclaimer:
The views expressed on this page are those of the author and not of The Portugal News.

Let me be the first to burst your bubble: there is no such thing as guaranteed income. Yes, you can sign a contract where the developer or management company promises you a percent every year, but they don’t always honor that contract. I should know. To obtain my Golden Visa I purchased two units in a property in Sesimbra being renovated by the IR group. The purchase agreement promised me at least 7% annual dividend. I received that dividend the first year and have not received any dividends in the last 4 years. I filed a lawsuit and just as the case was going to be heard, the IR Group went into pre-bankruptcy reorganization and have since filed for bankruptcy as well as the parent company that sold me the unit, Important Altura. Marriott sold them their brand, Four Points by Sheraton, though they claim no involvement in the business, and thus no financial responsibility to the aggrieved owners. My contract also provided that I could sell the units back to the developer after five years, but now that they are bankrupt, they can’t buy them. I cant sell them to anybody else because who would want them with the bankruptcy proceeding going on? So I’m sitting on two units for five years having made no income off of it and not able to sell them. And yes, I did have a guaranteed Income contract.

By Patrick from Lisbon on 12 Jul 2025, 10:24