Friday, January 19, 2007

Hotel Business Review

Long existing in the shadows of tourism hot spots such as Mexico and Costa Rica, Panama is quietly coming into its own as an international destination for eco-tourists, vacation home owners and retirees. While the country's economy traditionally has centered on banking and the lucrative Canal business, the government has recently recognized the enormous potential of the multi-billion dollar travel and tourism industry and begun touting Panama as an undiscovered leisure destination. Their efforts are paying off, as real estate investors and developers have begun to turn to Panama in search of exciting new resort development opportunities.

With beautiful beaches on both the Pacific and Caribbean coasts, lush rainforests, indigenous people, historical sites and mountain communities with agreeable year round climates, Panama is replete in natural and cultural attractions. Until recently, this rich mix of tourism offerings has been eclipsed by a view of the country as a "banana republic", a hangover from the infamous reign of Manuel Noriega. But this unfortunate perception could not be further from reality. In fact, when compared to the economies, infrastructure and stability of other destinations in Latin America, Panama is perhaps an even more inviting place to vacation, live and invest.

For years, the Panamanian economy has been among the most stable in Latin America, with the local currency pegged to the U.S. dollar since 1903, when Panama gained its independence. As a result, Panama has been less prone to major economic shifts than other Latin American countries and maintains a relatively low inflation rate. In addition, the presence of the Panama Canal, which was controlled by the U.S. from 1904 to 1999, and the Colon Free Zone has made Panama an important center for international trade. The U.S. presence has also contributed to the high quality of Panama's infrastructure, now among the most advanced in the region. Communications, utilities and transportation systems, including the soon-to-be completed renovation of Tocumen International Airport Panama, are all world class. The cities and towns are safe, cultural and historic attractions are plentiful, quality medical services are available and the cost of living remains decidedly low, a major consideration for many purchasers in second home communities.

With tourism growth now a national priority, important legislative changes have been made. Laws are now in place to protect investors from changes in taxes, customs, and labor rules for 10 years and a host of tourism investment incentives have been created, including a 20-year exemption from import duties, certain fees and income, real estate and other taxes. There is also a sincere effort on behalf of both public and private sector participants to minimize the entitlement process and the “time to market” for resort and hotel developers. For example, some resort developers have been pleased that the permitting process took less than 24 months, compared to more than four years in comparable destinations.

The country's promotional efforts, led by Minister of Tourism Ruben Blades - the award winning actor and musician - are also beginning to bear fruit. International tourism arrivals increased by six percent in 2003 as compared to 2002, and 15 percent in 2004 over 2003. Cruise ship activity is also on the rise and, over the past decade, more than 30 hotels and resorts have been developed. Panama continues to draw praise from various travel industry publications and was recently ranked as one of the best places to live in Latin America in a survey by Corporate Resources Group.

While neighboring Costa Rica has experienced a substantial escalation in prices of development sites, land costs in Panama remain a relative bargain for resort and retirement community developers. Projects targeted to U.S. second home purchasers and retirees have been developed in temperate mountain communities such as Boquete. One such project, Valle Escondido offers villas, condos, lots and homes all within a gated golf course community. In the Bocas del Toro islands on the Caribbean coast, Minnesota-based Pillar Development is now under construction with Red Frog Beach Club. Red Frog is currently marketing turnkey luxury residences with excellent ocean views, and plans to offer additional products and amenities such as an 18-hole golf course, condos and a 70-slip marina. These newer developments are complemented by several more established resort communities on the Pacific coast, such as Buenaventaura, a master-planned resort community that has been popular with locals and foreigners.

Perhaps the most exciting area for future development is the Las Perlas Archipelago, a chain of islands located in the Pacific and a 15 minute plane trip from Panama City. This island chain represents one of Panama’s best natural resources due to the quality of the beaches, tropical vegetation and the abundance of game fish in the surrounding waters. Several projects are in the pre-development planning stages in the Las Perlas islands, including luxury-oriented, resort destination anchored by a five-star hotel.

Given the phenomenal growth projected for the number of second home purchasers, the country’s undeniable beauty and variety of attractions and pro business climate, Panama should be a serious consideration by resort developers and international hotel chains. Particularly as local officials ramp up their marketing efforts, trumpet the country’s ample attributes and offer incentives, the range of potential opportunities appears endless.



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