Oversupply of Rooms Pushes Panamanian Hotel Industry Into Crisis

It seems to be the right time to visit Panama, because the hotel industry in the canal country is in crisis, with oversupply of rooms forcing hotels to slash rates drastically. Some hotels, however, are slashing services like WiFi in a bid to weather the storm.

As a few hotels are facing the risk of being seized by banks, the union of hoteliers is pressing the government to lure more foreign tourists. The chief culprit of the crisis is the endless construction boom and the oversupply of rooms, according to reports in the local press.

The number of hotel rooms has increased by 209 percent in the past three years while demand for rooms rose by a mere five percent annually, according to the Panamanian Association of Hotels (Apatel), which has called upon the government to drum up publicity for the hospitality industry in the outside world.

With tourist numbers dwindling, hotels are vying among themselves to welcome as many tourists as they can. As a result, reports say, today rooms are available for as little as US$60, whereas a year ago was trading at US$150.

The average hotel occupancy rate has declined to 40 percent, but industry analysts say a hotel needs to have 60 percent occupancy to break even. The five percent increase in tourist arrivals is not a small figure, but the problem is this increase is not sufficient to absorb the oversupply of rooms.

According to local paper La Prensa, more than $290 million was invested in hotel rooms between 2008 and 2014, most of them in Panama City, followed by Coclé, Chiriquí and Los Santos. Today there are more than 18,000 hotel rooms in the capital city alone; another 1,000 rooms are under construction.

Under pressure to avert the possible burst of the bubble, the country’s tourism authority is promising to spend millions of dollars promoting the country in markets such as the United States, Mexico, Brazil and Colombia.