Can Tourism Save Panama Real Estate?
(costaricapages.com) Having lived and worked for nearly a decade in Costa Rica and part-time for the last 5 years in Panama, I am fascinated by how the countries compare and contrast. One of the most noticeable differences is how real estate in Panama is placed ahead of tourism in terms of focus, marketing and money invested. By contrast, tourism has always been the main course in Costa Rica, with real estate being the byproduct. I contend that without the substance of tourism infrastructure, also known as “things to do”, real estate growth in Panama is hollow and unsustainable. I believe the recent bust in Dubai is a prime example of the downside of the “style over substance” approach to real estate development.
Plenty Of Time To Fix Things, Plenty To Fix
The good news is that Panama still has a great opportunity to rescue its real estate market. However, the required approach may unconventional. I believe that the new administration must make a strong commitment to fostering tourism, both foreign and domestic in order to support the last 3 years of real estate madness in Panama. This best part about this strategy is that laying the groundwork for sustainable tourism is not a mystery; the models for sustainable tourism and real estate growth are well known and the expertise is out there. Panama need only look to the successes and failures of Costa Rica, Hawaii, Mexico and other tropical destinations to mimic best practices and avoid common pitfalls. Doing things right will permit the country retain its unique and wonderful identity, while fostering the right type of tourism that can help to support a portion if Panama’s recent real estate growth.
New Administration, Fresh Start?
Panama will soon have a new administration and a chance for a fresh start to clarify its cloudy tourism strategy. I was asked recently by a business colleague to compile a list of tourism ideas and suggestions for this new administration. In turn I asked staff at my travel agency in Panama City to provide me some of their feedback, given that they slog in the trenches of Panama’s budding tourism industry daily. We compiled a monstrous list, then we realized…Panama needs to start with some basic stuff first.
Start Small
What often concerns me about Panama’s approach to business is the tendency to believe that bigger is always better. I can only presume that the scale of the Canal and Canal-related businesses leads many to conclude that scale is always desirable. Going big has been Panama’s approach to tourism in the past: big cruise ships, big duty free shops, big hotels, giant swimming pools and large convention centers. When discussing tourism ideas, I frequently hear many well educated locals talk about Panama’s need for mega highways, airport expansions, Disney World-esque attractions and other ideas of Canal-type proportions. Leaving aside for a moment the discussion of the merits of that type of tourism, I believe that before Panama can hope to accomplish ANY large-scale plan, the tourism sector needs to take full advantage of what is already here and solve obvious problems. There’s so much raw tourism material here today in Panama, but we lack the tourism infrastructure to properly introduce travelers to these treasures.
Specific Under-Utilized Destinations:
1. National Parks — Why would you come to Panama? How about ecotourism that surpasses Costa Rica’s for a start? Tourists need a proper introduction to these areas. Parks need guides, trails, maintenance, and enforcement of strict environmental rules. None of that is happening today. AMCHAM is working hard to present a specific plan for improving and organizing Panama’s unpolished gem and I hope the new administration will be open to this study.
2. Casco Viejo — Where are the walking tours? Wouldn’t it be great to see plaques on the historical buildings that clearly identify what tourists are seeing? I know, I know…there are some, but not enough. The Canal History Museum in Casco is fantastic…but in Spanish ONLY. What an incredible destination that just needs a little stewardship to go from OK to Great.
3. Bay of Panama — Imagine taking a water taxi from Costa del Este to Casco Viejo or The Causeway! There need to be more boat tours of Panama’s nearby islands and alternative forms of transport. Panama is surrounded by water, yet water-related tourism (with the exception of giant cruise ships) is very under-developed. It is surprisingly difficult to find a reliable sailboat cruise, sport fishing charter or boat rental in Panama.
What Needs To Be Done FIRST
1. Attract and Grow Talent — Panama needs more tourism talent. We need a quick fix and a long-term solution. Until there is a greater talent pool, hotels will always have staff challenges and tourists will enjoy one-star service.
a. Foreign Consultants/Interns — create temporary, 1 year work visa for foreign interns who are studying tourism at any of the top programs in the U.S., Europe and South America. Let them flock to Panama, make their mark…and go home in a year.
b. More Scholarships — long-term, Panama will need to re-educate its work force to meet the growing demand of tourism professionals. Through scholarships and other incentives, the new administration needs to compel more Panamanian students to pursue undergraduate and advanced hospitality degrees locally and abroad.
c. Reduce Marrakesh Quota — for tourism related businesses, employers like me need to be permitted to legally employ some foreign labor. I would propose reducing the quota to 4 local employees for every 1 foreigner. This will certainly be unpopular with the pro-labor crowds, but could be a huge boon for the economy as foreigners move here to work, spend money and improve the companies where they are employed.
2. Increase # of Quality Hotel Beds — We have a massive shortage of hotel beds in Panama. The tricky part now is to be sure that the RIGHT type of hotels are built. Boutique hotels under 30 rooms are the most successful in Costa Rica, take less time to finance and build, are what the clients of today demand and do not require the government to make concessions to multi-national behemoths, who tend to be chronic offenders of environmental and labor laws. The number of new hotels built in Panama over that past 3 years is pathetic. Why is nobody rushing into the industry when there seem to be so many opportunities? The government needs to answer that question.
a. Talent Shortage — See above. No point in building a hotel if you can’t staff it. Ask any hotelier about this point.
b. Labor Laws — The labor laws of today are punitive to tourism businesses whose M.O. is to be open on weekends and holidays.
c. Real Estate Prices — Speculation has driven prices out of range for many hoteliers to justify the investment. This is a tricky one, but if large scale projects were required to build a hotel within a stated period of time in order to receive ANAM approvals, you would see a lot of developers splitting out a parcel and selling it at a reduced cost to hoteliers. Ironically, this is the smartest thing they could do if they want to sell more land, but most developers fail to see the big picture. Right now, too many prime pieces of land that are perfect for hotels are sitting stagnant while speculators do nothing except hope that prices go up.
d. Incentives — Ley 8 needs to be beefed up to become super sized to Ley 88. If building and running a hotel were easy, and Ley 8 enough to offset the risks, you’d have seen more hotels built by now. Eliminate or reduce IPAT tax, tax on profits, payroll tax and labor laws and make it simple to receive discounts/tax breaks at time of purchasing building materials.
e. Financing — I must preface that by no means do I want the government to get into the banking business, but getting a bank loan for a tourism related project is nearly impossible today. Somehow the banks and the government need to work together to encourage small business loans for tourism and hotel businesses.
3. More Domestic Flights — We need more and better air transportation inside the country.
a. Subsidies — If the airlines don’t want to fly to certain destinations for fear the routes won’t be profitable today (prime example: Pedasi) then the government should step in to help temporarily. If the country is more connected via air, tourists will go to remote places and tourism there will flourish. Don’t believe me? Visit Costa Rica.
b. Airports — Most of the airports are in great shape (compared to Ticolandia) but the administration and service is terrible.
c. Competition — Not sure how difficult this is, but the two operators today really need a third competitor.
4. Traffic / Signs / Driving Laws — a complex issue to tackle, but this needs to be addressed soon as driving around is becoming increasingly difficult for locals, much less tourists. This is a huge turn-off for first time visitors.
Panama CAN be a world-class tourism destination if it so desires. With a world economic crisis now putting increased pressure on Panama City’s real estate bubble, I believe it’s more important than ever for Panama to back up all the style with substance and create a quality tourism infrastructure based on research, careful planning and involvement from the private sector.
