03.04.2020

Industries: Tourism & Leisure

COVID-19: Measures in the tourism and hospitality sectors

After the World Health Organisation announced the new coronavirus (“SARS-Cov-2”) outbreak a pandemic, Portugal triggered the alert system and several preventive measures were put in place, applied primarily to the freedom of economic initiative and free movement that impacted the tourism and hospitality sectors in particular.

In face of the rapid evolution of the pandemic, the Portuguese government found that further steps should be taken and the state of emergency was declared by Decree no. 14-A/2020 of the President of the Republic and Decree no. 2-A/2020, implementing it, on the grounds of public disaster.

The Abreu Advogados team has prepared, in this context, a summary of the main measures for the tourism and hospitality sector:

 

1. Which restrictions were applied to tourist facilities and catering and drinking establishments?

When the state of alert was declared a number of measures were decreed, such as closing time of bars every day at 9 pm (by Order no. 3299/2020) and occupancy rate of 0.04 people per square metre, in the public areas of retail stores, supermarkets and shopping malls (see Ordinance no. 71/2020).

When the state of emergency was announced, free enterprise was restricted further, as deemed necessary in view of the current pandemic.

Consequently, Decree no. 2-A/2020, enforcing the state of emergency, forced businesses that are not considered essential to close.  All retail trade was put on hold, as was the delivery of services in businesses open to the public.

The following establishments had to close: Recreational, leisure, and entertainment facilities (such as clubs and places for dancing– which had already closed as a result of Decree-law no. 10-A/2020 and Order no. 3298-B/2020 –, amusements parks and sports facilities and playgrounds); culture and art activities (namely, museums, conference centres, multiuse and meeting rooms); sports activities, with the exception of activities of high performance athletes (such as football fields, pavilions or indoor facilities, firing ranges, tennis, padel courts and the like, swimming-pools and gyms); outdoor facilities, spaces and public roads, or private areas and roads that should be considered as public (such as, cycling tracks, public parades and festivals); gaming and betting facilities (such as, casinos, facilities operating games of chance, games and recreational rooms); spas or related facilities.

Restaurant services (provided by restaurants and the like, cafés, tea shops and the like, bars and the like) were also suspended. However, restaurants can continue to operate, provided that they repurpose their business as takeaways. In such cases, they are not required to obtain the license for operating as takeaways or delivering food to home, as would be the case before the outbreak. Restaurants can also require their employees to perform delivery services, even where this was not specified in their work contract. 

Similarly, tourist establishments shall remain open to serve food and drinks in the establishment itself and only to guests.

Wholesale businesses and other establishments continue operating under similar conditions, i.e. for home-delivery service only or pick-up at the shop doorstep, although access to the inside of the shop is prohibited.

On the other hand, businesses providing basic necessity goods and services and other deemed essential in the current framework must continue to function. Similarly, motorway service areas, and stores in airports and hospitals must stay open.

The member of the Government in charge of the economy may also authorise new facilities or businesses to operate, or license other retail or service activities, including catering, that are proven essential as the current pandemic evolves.

In order to protect traders, the Decree provides that the closure of premises and establishments may not be invoked as grounds for withdrawing from or otherwise terminating non-residential lease agreements or other forms of contractual exploitation of property, nor as a ground for an obligation to vacate property occupied by the business.

To conclude, drinking alcohol in public areas is strictly forbidden (see Order no. 3301-D/2020).

 

2. How has the right to free movement of persons been affected?

Concerning the free movement of persons, several measures have been issued since 9 March 2020, such as the ban of flights to and from Italy (see Orders no. 3186-C/2020 and no. 3186-D/2020); the reintroduction of Portuguese domestic borders (see Resolution of the Council of Ministers no. 10-B/2020);  flights to and from Portugal to countries outside of the European Union were banned (see Order no. 3427-A/2020) (with several exceptions); and the ban on international coach transport (see Order no. 3301-D/2020). When the government declared state of emergency these measures were reinforced. And it decreed:

  1. Mandatory lockdown of COVID-19 patients and people infected with SARS-Cov2 and of all citizens who were put under active surveillance by health professionals;
  2. Special duty to protect elderly over 70 years, as well as immunosuppressed persons and persons who suffer from chronic illnesses and must be considered at risk; and
  3. The general duty of partial lockdown for all other citizens, who may only leave the house in a few circumstances (namely, to purchase goods and services or to carry out professional duties).

Consequently, Order no. 3659-A/2020 was published on 23 March 2020, laying down the terms for authorising the entry of passengers in Portugal (by SEF, the Portuguese foreigners and border authority). Thus, in addition to the need to comply with the obligations imposed by the Directorate-General of Health, only the following categories of passengers may enter Portugal:

  1. Nationals of European Union Member States and Schengen associated countries (i.e., Liechtenstein, Norway, Iceland and Switzerland) and their family members;
  2. Passengers on flights from Portuguese-speaking countries, and from South Africa, Canada, the United States of America, the United Kingdom and Venezuela, provided that reciprocity of treatment of Portuguese citizens in the aforementioned countries is guaranteed;
  3. Holders of residence permits;
  4. Health professionals and researchers in the area of health and humanitarian aid workers, provided that in the exercise of their functions;
  5. Persons exempted from residence permit and holders of identity document issued by the Ministry of Foreign Affairs (namely, accredited diplomatic and consular agents in Portugal, administrative and domestic workers or equivalent who come to provide services in the diplomatic missions or consular posts of the respective States, officials of international organisations based in Portugal and members of their families);
  6. Repatriated citizens under the consular assistance mechanism;
  7. Applicants for international protection;
  8. Citizens travelling for urgent professional matters duly proven;
  9. Nationals of Portuguese-speaking countries under health protocols concluded for urgent and unavoidable medical acts; and, finally,
  10. Citizens whose entry is justified on humanitarian grounds.

 

3. Has financial support been foreseen for companies in the tourism and hospitality sector?

Yes. Among the loans approved as a result of the COVID-19 pandemic, three specific lines are intended to support the tourism and hospitality sector, namely (see document published by IAPMEI called “Economy Helpline – COVID 19”):

  1. Restaurants or other similar food service operations: € 600 million euros;
  2. Tourism operations: € 900 million euros;
  3. Travel agents, tourist operators, event organisers and similar operations: € 200 million euros.

 

Divided as follows:

 

1.

Restaurants or other similar food service operations

 

(€ 600 million)

2.

 Tourism

 

(€ 900 million)

3.

Travel agents, tourist operators, event organisers and similar operations

 

(€ 200 million)

Micro and small companies (SMEs)

270 million

300 million

75 million

Medium and Small Mid Cap enterprises

321 million

-

600 million

120,500 million

Mid Cap enterprises

9 million

4,500 million

 

These specific credit lines shall be available until 31 December 2020. Loans are granted on a first come first serve basis., but if the full amount has been used before the date mentioned above, the scheme ends there.

 

I. Benefitting companies

These credit lines are for financing cash requirements of Micro and SMEs, certified by Electronic Declaration of IAPMEI, as well as Small Mid Cap and Mid Cap companies, which develop some of the activity(ies) included in the eligible economic activity per credit line, located in the national territory and provided that they meet the following requirements:

  1. Statement committing to not making any dismissals of permanent workers or lay-off of workers;
  2. Positive net position on the last approved balance sheet or negative net position, provided that this position is settled in an interim balance sheet approved by the date of the transaction;
  3. No pending issues with Banks or mutual guarantee schemes on the date of conclusion of the contract;
  4. Up to date with payments to the national Treasury and the Social Security, excluding debts incurred in March 2020;
  5. Were not considered as companies in difficulty on 31 December 2019, resulting in the difficulties faced during the exceptional circumstances caused by the COVID-19 pandemic;

 

II. Ceilings for Financing

Once the above requirements have been met, entities are considered as beneficiaries and may apply simultaneously to more than one specific line of credit. However, the following funding limits were set per company type:

  1. € 50 thousand euros for Micro companies;
  2. € 500 thousand euros for Small companies; and
  3. € 1,500,000 (one million and five hundred thousand euros) for Medium-sized, Small Mid Cap and Mid Cap companies.

 

III. Common conditions for applying to the three specific lines of credit

    a. Term of the operations: 4 years after signing of the contract;

    b. Grace period: until 12 months (from signing of the operation contract);

    c. Capital amortisation: equal, consecutive monthly payments made in arrears;

    d. Duration: until 12 months (from signing of the operation contract);

    e. Interest rate: fixed or variable interest rate as agreed by the bank and the beneficiary;

    g. Mutual guarantee: credit operations benefit from first call guarantee provided by mutual guarantee scheme:

 

  • Micro and small companies: 90%
  • Medium enterprises and Small Mid Cap and Mid Cap companies: 80%

 

    g. Counter-guarantee from mutual guarantee scheme: Guarantees issued by the scheme with counter-guarantee of 100% by the Mutual Counter-Guarantee Fund (MCGF);

    h. Guarantee fee: lumpsum payment made by the beneficiary with final maturity;

The procedure for the approval of the financing decision lasts approximately 40 days (from the analysis of the request by the Bank, the mutual guarantee scheme and the enforcement of the contract).

 

IV. Infringement

In the event of failure to comply with the conditions governing the financial aid, the following consequences are foreseen:

  1. Spread increase with effect from the respective date; and
  2. Where false information is supplied or beneficiaries fail to comply with the obligation not to dismiss employees, interest rates and guarantee fees are increased and applied retroactively from the date of contracting of the loan.

 

An additional credit line of 60 million euros is also available for micro tourism enterprises, granted as a repayable form of financing, interest-free, to meet treasury needs as well (Regulatory Order no. 4/2020).

I. Beneficiaries

Micro-size tourism businesses are regarded as beneficiaries if they meet the following requirements:

  1. IAPMEI electronic certificate;
  2. Up to date with payments to SS and tax authority and Turismo de Portugal. I.P.;
  3. Licensing and registration with the National Tourism Registration, if required;
  4. Proof that the activity was adversely affected by the outbreak of COVID-19;
  5. Proof that it is not a company in difficulty; and
  6. Must have not been the subject of administrative or judicial penalties in the last 2 years; nor have been convicted in a final judgment of unlawful dismissal of pregnant workers or who have recently given birth or are breastfeeding.

 

II. Ceilings

  1. By employee: Up to € 750 euros/month/workers;
  2. By company: Up to € 20 thousand euros; and
  3. Duration: until 3 months.

 

III. Financing conditions

  1. Refund/repayment up to 3 years, in equal and regular quarterly instalments, without interest;
  2. Grace period: 1 year;
  3. Guarantee: individual shareholder guarantee;
  4. Responsible entity: Turismo de Portugal, I. P., with which the contract was signed.

 

Application is made by electronic means using the form made available at the portal of Turismo de Portugal, I. P.

The procedure for obtaining the funds provided by these specific credit lines is approximately 20 days long (from the analysis of the request by Turismo de Portugal I.P. and the enforcement of the contract).

 

IV. Infringement

  1. Contracts may be terminated unilaterally by the Turismo de Portugal, I. P., where there is breach of the contract;
  2. Termination shall entail the reimbursement of the financial assistance received, plus interest calculated at the rate indicated in the contract granting the financial aid, within 60 working days from notification.

 

4. As a consumer, if I wish to cancel a hotel reservation due to the pandemic, am I entitled to claim the reimbursement?

It should first be stressed that the answer to this question always depends on the specific situations.

In the case of a package holiday, Article 25 of Decree-law no. 17/2018 entitles the traveller to terminate the travel contract at any time before the start of the journey. If this is the case, the traveller may be required to pay a suitable and justifiable termination fee.

However, "if there are unavoidable and exceptional circumstances at the place of destination or in the immediate surroundings" which "considerably affect" the completion of the journey or transport to the destination, the traveller is entitled to terminate the contract before the start of the journey without having to pay any fee. In such cases, the travel and tourism agency must refund the traveller within no more than 14 days. In abstract terms, the current crisis caused by “COVID-19” may be covered, subject to case-by-case analysis.

For other situations, change in circumstances may be alleged, which legitimises the termination of the contract, obliging the entities, namely hotels, to reimburse the payments made. However, these circumstances must be analysed on a case-by-case basis and is highly exceptional in nature.

However, lately, several entities in the tourism sector have relaxed their cancellation policies in view of the current pandemic situation. Therefore, it is important to analyse such policies carefully.

For example, the Airbnb booking platform now allows the cancellation of reservations made until 14 March 2020, and check-in date between 14 March 2020 and 14 April 2020, with the right to a full refund.

 

5. If my flight was cancelled, am I entitled to a refund?

Concerning the cancellation of flights, Regulation no. 261/2004 of the European Parliament and of the Council provides that passengers may exercise their right to reimbursement within 7 days or re-routing in the event of long delay of flights.

With regard to possible compensation for cancellation, compensation is excluded in the case of extraordinary circumstances, which could not have been avoided. Overall, the current pandemic may apply, so passengers with cancelled flights would not have any right to compensation.

 

 

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