Carnival has ended in Panama, and with it, local economies are tallying up the numbers for the country’s biggest tourism event of the year. And while all eyes were on the parades, bars, and restaurants; it’s Panama’s hotel industry that takes home the biggest piece of the cake every year. In fact, each year over the last three years has seen record numbers for hotels during carnival. And that trend seems to be here to stay. Not only are Panama’s holiday hotel numbers surging, but also year-round investment into the hotel industry is higher than ever. And although it’s early, 2015 looks to be another huge year. Here’s why.
Panama is both a business AND tourism hub
The biggest factor behind the pending success of new hotel investment is whether or not the demand to fill the rooms is there. Being a business hub is great. Being a tourism hub is also great. Being both at the same time almost guarantees year-round business. It also means a diverse group of clientele, which makes the market very wide, and very apt for all types of hotel development. Panama is known as an international business center, and with easily accessible flights, makes a perfect location for conventions and on-site visits. It’s also a fast growing tourist market. This means diverse investments are becoming more popular, with small boutique hotels as well as big hotels/resorts all vying for a piece of the pie.
By the numbers
In the past five years, investors have pumped close $2 billion into hotel development in Panama. The biggest investment year in that period was 2012, when economists estimated nearly $500 million in hotel growth. According to Panama’s ministry of tourism, there are over 20,000 hotel rooms in the country, spread between close to 650 hotels and resorts. These are huge numbers when you look at the demographics of the country and its relative geographic size.
In 2014, projects such as a 60+ story Hilton tower, and Hotel Riu’s 500+ room resort in Playa Blanca highlighted a major investment year into Panama’s lodging sector. In 2015/2016, investment is going to grow even more, with 14 new hotels planned for construction. According to the national tourism association, these will include projects from The Queen Hotel, Planet Hollywood, Crowne Plaza Panama Airport, The Ritz-Carlton, and Embassy Suites.
Betting long-term on supply/demand
Panama’s hotel boom doesn’t come without criticism, however, with many citing overbuilding and market saturation in the region. According to government statistics, an average just over two-thirds of Panama’s hotel rooms are occupied at any time. Some experts predict that this number will increase in 2015 and 2016, as the new developments go up faster than the demand from travelers. Developers know this, and aren’t deterred, citing that the demand will meet the supply once development slows down a bit. Essentially, it’s betting on a long-term strategy for the future.
Panama’s tourism industry has had phenomenal growth in the past few years, and all signs point to that trend continuing for a long time. There is also the question of the Canal, which despite delays will bring in thousands of new business travelers, and looks to be sustainable for some time to come. Hotel developers are riding the building wave now, even with a logjam from the competition, because they believe that if they wait, their inaction will cost them. In other words, hotel investors are OK with short-term vacancies, because they will lose less money than they would if they wait to build, and land/labor costs go up.
It’s a big bet, and an expensive one. But if 2014 was a sign of what’s to come, you can expect continued hotel development and investment in Panama for the long term. You just may have to wait a bit to see the returns.
