Tourism in Panama: Seeing Exponential Growth

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In the past decade Panama has received a lot of interest as a tourist destination. This is in part due to travelers’ natural desire for new destinations, but also because the country—located next to tourist friendly Costa Rica and blessed with similar landscapes—woke up to the opportunities the sector had to offer and began incentivizing its growth.

Ten years on and the tourism industry now constitutes approximately 10 percent of Panama’s national GDP and has grown an average of 15 percent annually over the last two years. To discuss the huge benefits this is bringing to the country, as well as the hurdles that are slowing growth, AS/COA hosted a panel featuring Salomón Shamah, director of Panama’s Tourism Agency, Vice President of Marriot International & Ritz-Carlton’s Hotel Development for the Caribbean and Latin America Paul Adán, and national flag carrier Copa’s Vice President for Commercial and Planning Joe Mohan.

Historically, the country never saw itself as a tourist destination, said Shamah, and always considered itself a services, logistics, and financial center. The reason the tourism industry grew so quickly over the last ten years, he explained, was because Panama was already a service-oriented country, so tourism was an easy fit. Shamah said the government expects the sector to continue expanding at 8 to 10 percent over the next five to ten years. However, Shamah warned that capacity would have to increase significantly in the country’s major international airport, Tocumen, as well as airports in the interior. At the moment, there is an excess of tourist beds in the capital and a deficit of seats on incoming flights.

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And while the next three to four years will be very complicated for the hotel sector as demand settles, said Marriott’s Paul Adán, his company still sees Panama as a good bet for investment. They have three hotels operating and are building a fourth. An attractive legal framework, investment security, economic activity around the Canal expansion, infrastructure investment, and industry-incentivizing laws all attract multinational firms to the country, said Adán.

Copa’s Joe Mohan highlighted the role of Tocumen airport as both a regional hub and a shopping center in its own right, with $290 million in duty-free sales last year alone. Passengers transiting through the hub have the advantage of not having to pass through security or immigration, as opposed to a similar hub like Miami. Adán echoed this point, adding that the interior of the country also had a lot of potential as people start to think of Panama as a place to go for beaches, tourism, shopping, and casinos.

Both Shamah and Adán talked about the need for changing regulation in order for the industry to continue growing. Shamah talked about Ley 8, which seeks to incentivize tourists to go to Panama City and other selected areas on the country. While the law has been effective, it has “cannibalized” other areas of the country, so an amendment has been written and is ready to go through the national assembly that will invert regulation and incentivize the entire county except for Panama City. Adán talked about personnel capacity as the greatest challenge the private sector sees coming up over the next few years. Currently, he said, there are 2,500 tourist beds in Panama, which represent an equivalent amount of people working. This year 5,000 new rooms are being built, tripling capacity, and next year 1,000 new rooms are to be built. This means hotels will need to hire approximately 6,000 new employees in the next two years, something Adán sees as a significant challenge. He discussed the government easing restrictions on the hiring of foreign nationals in the tourism sector to help fill these places, and suggested the government create a top-grade tourism school to help train staff.

David Gacs is new media manager at AS/COA Online.