Hotel industry on brink of crisis as tourism booms

FOR VISITOR’S to Panama City planning a hotel stay. it’s the best of times as the hotel industry hovers on the brink of crisis and room rates continue to plummet in spite of a 48% increase in tourists in the last three years.

There was a time when a hotel room in Panama City was hard to come by, and rates appeared to have no ceiling. But during the last three years, the number of hotel rooms in Panama has grown by 209 percent, nowhere near matched by the increased flow of tourists, many of them backpackers.The occupancy rate has plummeted and operators are having to slash rates.
Compounding the problem. says a La Prensa report has been a lack of an international marketing strategy, which has lowered Panama’s profile.
Due to the low occupancy, hotels have slashed services, such as free internet and buffets. At least three hotels have rotated staff to reduce their operating costs.
Sara Pardo, president of the Hotel Association of Panama (Apatel), told La Prensa that in 2008, when the hotel boom started, the government pledged that it would comprehensively promote the country, a commitment which has not been fulfilled.
Currently, in the capital city there are more than 18,000 hotel rooms, with another 1,000 expected to be available soon.
“There are hotels that are in the red due to the war of rates caused by the oversupply of rooms,” said Pardo.
Although there is nothing confirmed, there are at least 15 hotels that are close to closing or which are up for sale because of losses in recent years.
“Nobody wants to accept that the industry is in crisis, but the truth is that there are hotels that are going through a bad time,” she said.
Industry experts warned that there are hotels at risk of being seized by banks in the coming months.
Despite the fact that the low prices benefit Panamanian consumers, the truth is that the hospitality industry was not designed for the local market. Between 2008 and 2014, more than $290 million was invested in hotel rooms aimed at foreign visitors, most of them in Panama City, followed by Coclé, Chiriquí and Los Santos.
Panama City hotels had an occupation rate of just 40 percent in June.Industry experts say that a hotel needs a minimum of 60% to stay afloat.
Panama Tourism Authority Administrator Jesús Sierra, who once headed the Hotel Association convened a meeting with business owners linked to the tourism industry on Thursday.
Sierra indicated that in the second half of the year, $12 million will be spent to promote the country in markets such as the United States, Mexico, Brazil and Colombia.
Of this total, some $8 million has already been committed in contracts with media such as CNN, and to develop a digital marketing campaign. He also announced that a contract would be issued to hire a firm to develop an international campaign to be used between 2016 and 2019.
The marketing investment over the next four years will exceed $100 million, he said.
This year the agency has an $11 million marketing budget, but has spent only 3 percent of that amount.