This paper looks at the expansion of tourism in Portugal in the general context of the southern European countries, and focuses on the development of the hotel business in Portugal between 1950 and 1995. Some writers hold that the entrepreneurial fabric in the package holiday and mass tourism business is fragmented, overly dependent on tour operators, and usually adverse to foreign investment. We propose to analyse foreign investment in the hotel business over this period. Tourism is also seen as a sector little favoured for investment by the State, even though it is noted that Portugal in the seventies was an exception to this general rule. We propose to analyse public and private investment in the hotel business and to examine whether any changes took place over this period in the average size of hotels and of firms in this sector. We shall also seek to relate investment in capital goods with the growth in the number of occupations in the hotel sector requiring an average level of qualifications. On the basis of a typology of occupations in the hotel trade we will establish whether there was any improvement in a sector which is traditionally viewed as not absorbing a very large proportion of skilled labour. Finally, we will examine increases in unit labour costs and trends in those costs to determine what percentage they represent of total costs, together with the efforts made to save on such costs. The basis for this analytical exercise is the relationship between productivity gains and competitiveness in the hotel sector. This point is very important when we consider how productivity growth has been observed in services compared to commodity production. Angus Maddison points out that the general view is that productivity growth tends to be slower on services due to the intrinsic character of many personal services and partly because of measurement conventions, which sometimes exclude the possibility of productivity growth.