Panama City, Panama as seen from Casco Viejo

For a country at the center of global investment and tourism chatter, why are so many visitors to Panama getting a bad first impression?

The Republic of Panama, once only thought of as a tiny country with a canal, is now the home of Central America’s fastest growing economy and hottest migration destination: a mecca for real estate development, a wonder for adventure travelers, and a low-cost haven for foreign retirees.

But with such a rapid influx of foreigners to the isthmus, the businesses in this tropical nation (only three million people strong) are trying hard to satisfy the demand for luxury goods and services: most specifically in the hospitality industry where standards are oftentimes below par: a first impression that experts say could stymie Panama’s development as a tourism hotspot.

Due to its history as a trade and banking hub, Panama’s workforce evolved less skilled in the industry of hospitality: a void which is being exposed by high-end travelers and investors whose expectations of fine dining, luxury hotel accommodations, and first-rate customer service are oftentimes not being met. Several industry moguls have made significant efforts to satisfy this demand, such as the ultra-successful Empressas Bern with their announcement of the Panama International Hotel School in a suburb of Panama City. But will this type of last minute effort prove to be too little too late?

An increase in the number of pure hotel rooms is reportedly in with works with the nation’s tourism board (IPAT) recently approving nearly fifty new hotel projects totaling upwards of 7,000 rooms to be added to the mix. And while most of these projects are concentrated in Panama City, the nation’s interior too is dotted with various independent development projects of majestic scale. The Pacific Coast’s Playa Blanca Beach Resort (just 1.5 hours from Panama City) for example, has new expansion plans to house thousands of incoming tourists; a project which will foremost feature a beachfront crystal water lagoon spanning a colossal 17-acres.

But with such grand tourism aspirations for its future, surprisingly few short-term solutions have arisen from the shores of the isthmus as a way to properly accommodate the flocks of visitors arriving—not in the years to come when many of said projects will be complete—but today and now, as finding a last-minute hotel room or a restaurant with consistently stellar service can be quite the arduous task.

One prospect, simultaneously offsetting the anticipated real estate slow-down in Panama City, is the conversion of condos into condo-hotels which has proven profitable in many leading travel destinations; a solution, not unlike a boutique hotel, characterized by a limited fleet of units available for rent as well as intimate customer service.

Property management companies like Los Cuatro Tulipanes in Panama City’s historic district of Casco Antiguo are setting the trend by offering hotel-style service in luxurious historic apartments. Such business models appear to alleviate the scarcity of accommodations while—with a small and finely-tuned staff—acting as a temporary fix for customer service shortcomings in the nation’s capital.

Local travel agencies are also facing challenges as increasing tourist demand outstrips the pace of new hotel construction. Casey Halloran, Co-Owner of Panama Luxury Vacations said, “After two years of waiting for the phone to ring, we never could have predicted the present situation. Demand has spiked so quickly that we often cannot find rooms for our guests. Those few hotels that do have rooms are charging twice as much as they did just 12 months ago and service is often sub-par. The most startling fact is that there are very few hotels anywhere near completion, so it seems there is no relief in sight.”

On the development front, progressive builders like Salzburg Development S.A., also located in the UNESCO heritage site of Casco Antiguo, are seizing the burgeoning trend of condo-hotels, offering turn-key apartments to investors with high-end finishes. ”Buyers of condo units in Casa Malecon now have a new investment option with lucrative hotel/rental income coming in when the unit is not occupied,” says Joel Jelderks, a principal at Salzburg Development.

Luxury travel agencies, boutique property management companies, and forward-thinking developers are shedding new light on the once-daunting prospect of a real estate and tourism bust in Panama City, Panama. But as a nation buzzing with investment travel potential, it appears Panama’s most frenzied days may be yet to come.

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Filed under: News, Real Estate on March 24th, 2008