BY PAUL McBRIDE
The fact that the number of "visitors" coming to Panama has increased dramatically over the past 10 years is undeniable. Yet it's important to make a distinction between "visitors" and "tourists". 41 percent of the increase in visitors over this period can be attributed to the increase in cruise ship passengers. Less than 15 percent of the current visitors to Panama arriving by air or land spend any time at all outside of Panama City. Any tour operator or travel agent will tell you that most real tourists only spend a short time in the city. Panama's real attractions (and the attractions promoted by IPAT) are all the wonderful sights located throughout the country at the beaches, on the islands and in the mountains. However, the numbers show that only a small fraction of the visitors coming to Panama travel outside of the city.
THE GROWTH OF TOURISM IN PANAMA
The foundation for any sound business decision is the ability to collect and analyze accurate data. Without reliable numbers, any decision that's made is a gamble, a simple crap shoot.
On paper, tourism is the fastest growing industry in Panama. According to statistics provided by the Panama Tourism Bureau, IPAT (STATISTICS REPORT 1997-2006), in 2006 the tourism industry contributed $1.45 billion dollars to the nation's economy. This amount represents 9.5 percent of Panama's total Gross Domestic Product (GDP), making it the largest single industry in the country. By comparison, in 2006 the Panama Canal generated $1.08 billion dollars in income while the total economic impact of the Colon Free Zone was a paltry $696.2 million dollars.
IPAT's statistical analysis also showed that the number of international visitors arriving in Panama was equally impressive. In 2006, a total of 1,215,083 people came to visit Panama. This is an incredible accomplishment given that in the year 2000 visitor arrivals were just was about half that number (600,169).
What's driving these remarkable achievements? According to IPAT, the answer can be found in their report: "We can say that incoming tourism to Panama has maintained a sustained growth due to efforts made to strengthen strategies to promote Panama internationally in US, Latin-American, European and Canadian markets, as well as efforts to consolidate the cruise ship industry." In other words, the growth in the tourism industry is a direct result of IPAT's marketing strategy.
But, what exactly is that strategy. Well, by judging past marketing efforts including the recent "The Path Less Traveled" campaign, IPAT has been positioning Panama as a wonderland of sun, tropical beaches, remote islands, unspoiled rainforests and cosmopolitan city life. With such a successful marketing campaign and with well over 1 million visitors traveling to Panama, the beaches, islands, mountains and rainforests must be teeming with tourists with hotels bursting at the seams, tour operators running at full capacity and domestic flights packed with vacationers. All these areas must be singing songs of praise for the fabulous job done by the nation's tourism authority.
THE NUMBERS TELL A DIFFERENT STORY
Curiously, if you dig a little deeper into the IPAT study, if you do a little research and find the numbers for hotel occupancies and airline passenger data, a different story emerges.
Before analyzing this data however, let's look at a comparable tourism destination with equally impressive visitor numbers - Costa Rica. Costa Rica has been Central America's premiere tourist destination for nearly 25 years. During that time a mature tourism industry has evolved with a substantial amount of investment made in areas throughout the country.
In 2005, the last year of published statistics, the number of international visitors arriving in Costa Rica totaled 1,679,051. Of these arrivals, over two thirds came from North America and Europe (over 1 million visitors).
How do these visitors get to the country? Costa Rica has 30 different international airlines servicing their main airport, Juan Santamaria in San Jose. Of the 1.6 million visitors to Costa Rica, 1.2 million (75 percent) passed through the country's airports and over 1 million of these passengers originated in North America and Europe. International visitors are not just arriving in the capital city. In 2005, nearly 300,000 foreign tourists arrived at Costa Rica's second international airport in Liberia located in the Guanacaste Province.
It is also interesting to note that, unlike Panama, Costa Rica does not include cruise ship passengers in their visitor arrival statistics. Rather, they classify the 255,336 cruise ship passengers as "Excursionistas" since they spend just a few hours in the country.
Where do these visitors stay? Costa Rica's official statistics reveal that 38.8 percent of total available hotel capacity is located in the capital city while 60.2 percent of the capacity is located outside of the city and spread fairly evenly across the country. Most tourists visiting Costa Rica spend the majority of their time outside of San Jose.
When asked what impact a million tourists have on Costa Rica, a leading tour operator explained it this way, "A million tourists mean packed hotels on the beaches and in the interior. Every domestic flight is filled and buses and tour guides are in short supply. Simply put, you see tourists everywhere, particularly in the areas outside of San Jose."?
HOW PANAMA COMPARES TO COSTA RICA
Of the 1,215,083 official international arrivals in Panama, 703,545 arrived via Tocumen International Airport or 58 percent of the total. According to statistics provided by Tocumen International Airport, 35 percent of these passengers were from North America and Europe (compared with 67 percent in Costa Rica) while 39.4 percent were from South America. 13 airlines operate scheduled passenger flights into Tocumen Airport (versus 30 international airlines operating to Costa Rica) and just one airline, COPA, dominates Tocumen with 66.4 percent of all passenger and freight traffic into the airport.
Where are these visitors staying? According to the IPAT statistic report, between May of 1995 and December of 2006, $1.56 billion dollars was spent in tourism related investment in Panama. Of this investment, $1.5 billion was allocated in the construction of lodging and hotel rooms. Expenditure statistics show that 86 percent of the total investment was spent in Panama City alone while just 2 percent was invested in Chiriqui and only 6 percent in Cocle (the beach hotels). Bocas del Toro, one of Panama's favorite tourist destinations, saw less than $5 million in investment over 10 years, or just .03 percent of total expenditures. Contrary to development in Costa Rica, where most tourism investment is directed to areas outside of San Jose, over the past 10 years nearly all tourism related investment in Panama has been spent in the capital city.
Let's take a closer look into these numbers. According to figures provided by IPAT, just 18,714 foreigners (extranjeros) stayed in hotels in the Province of Chiriqui during 2006. Information obtained from an internal domestic airline study showed that a total of 22,044 foreign passengers flew to Bocas del Toro in 2006. The Pacific Beach area between Coronado and the Decameron is perhaps the most popular destination for foreign visitors. Based on room availability and an estimated annual occupancy of 75 percent (pretty optimistic), the maximum annual number of visitors to this area is approximately 85,000.
The table below summarizes these results:
Location Number of Foreign Visitors % of Total Visitors In 2006
Chiriqui 18,714 1.54%
Boca del Toro 22,044 1.81%
Pacific Beaches 85,000 (estimate) 7.00%
Total 125,758 10.35% of 1,215,083 visitors
What these numbers show is that only a fraction of the visitors reported to have arrived in Panama are traveling to the three most popular tourism destinations in the country. Compared to Costa Rica, where the vast majority of tourists spend most of their vacation outside of the capital city, most visitors arriving in Panama (nearly 90 percent) never leave the city.
SO WHAT ARE THESE VISITORS DOING AND WHERE ARE THEY GOING?
The first thing that is important to know is IPAT's definition of a visitor. IPAT segments international visitors arriving in Panama into three categories:
VISITOR - Any person who travels to a country different from his permanent place of residence, for any reason other than carrying out a remunerated activity in said country. (This is anyone entering the country that is not paid to do so).
TOURIST - Visitors whose minimum stay in the country is more than 24 hours and whose maximum stay is no longer than 12 months. (Anyone entering the country and staying for at least a day)
EXCURSIONIST - Visitors whose stay in the country is less than 24 hours. (Primarily cruise ship passengers). Unlike Costa Rica, IPAT includes Excursionists in their total visitor arrival statistics.
So, by these definitions, everyone arriving in Panama is considered a visitor but not all visitors are considered tourists or excursionists.
In absolute terms, visitor arrivals into Panama increased from 555,026 in 1999 to 1,215,083 in 2006 or 660,057 additional people. On the surface, these are impressive numbers. However, what was the biggest source of new visitor arrivals? According to IPAT statistics, 41 percent of the increase is due to cruise ship passenger arrivals. This means that nearly half of the increase in visitor arrivals between 1999 and 2006 can be attributed to just one source - cruise ship traffic.
What is the economic impact of these cruise ship passengers? IPAT calculates that each cruise ship visitor spends $95 during their short stop over in Panama. Based on 2006 visitor arrival statistics, 356,140 visitors arrived through the marine ports in Panama. Although this represents 29.3 percent of all visitor arrivals, these passengers account for just 2 percent of total visitor expenditures. So cruise ship arrivals significantly increase visitor arrival statistics but have very little financial impact on the economy as a whole.
In 2006, according to IPAT statistics, 858,943 visitors arrived in Panama by land or air. Of that amount, only 14.6 percent (125,758) left the city to visit the most popular tourist destinations in the country - Bocas del Toro, the Pacific beach areas and Chiriqui. This means that over 85 percent of the visitors arriving in the country by air or land never left Panama City.
Do real tourists come to Panama and just stay in the city? The question that needs to be asked is "What are these visitors doing in Panama?". Are they really tourists or are they coming for other reasons? If they are coming for other reasons, is the money and effort that IPAT is spending really effective at bringing tourists to Panama? Or is the economy, the growing commercial market and, yes, residential tourism really driving the visitor increase?
Other than increased cruise ship passengers (representing nearly 30 percent of all visitor arrivals into Panama), real tourism growth outside of Panama City has been virtually non-existent.
WHY THIS IS IMPORTANT
It is important to analyze this data in order to determine the impact the tourism industry is having in Panama and what is driving this market. IPAT has spent a lot of time and effort orchestrating a public relations effort to show how effective it has been in growing the tourism industry. On the surface, the number of visitors coming to Panama is significant and impressive. If a million tourists were coming to Panama and traveling to the interior of the country, the impact would be huge both economically and environmentally. However, the real numbers show that only a fraction of the purported visitors are actually leaving the city and the vast majority of this minority are going to one place - the Pacific beach resorts.
IPAT is using these statistics to support proposed legislation that will have a significant impact on the way tourism is developed over the next 20 years. Unlike previous tourism master plans, this new plan will be put into law and will have a lasting effect. This influence will go well beyond the marketing and promoting of tourism to Panama. According to Jaime Cornejo, the national director of the Tourism Master Plan, the new plan "showed concerns for issues such as human resources, IPAT's autonomy on territorial ordering as well as the laws and regulations of the industry's development."
Most disturbingly is the reference to "territorial ordering." What this means is that IPAT wants the authority to dictate how land will be used throughout the country. The minister of tourism is on record as saying that "residential tourism is an oxymoron". Yet IPAT statistics include "residential tourism" visitors in calculating total visitor arrivals. Given the authority to establish "territorial ordering," IPAT is likely to limit residential projects throughout the country at the very time these developments are providing the catalyst for the little tourism that reaches the interior of the country.
Accurate numbers are the foundation of sound business decisions. Investors and developers of hotels and resorts depend on reliable statistics to make their decision to locate in a particular country. Unfortunately, there is a wide disparity between the perception of tourism in Panama and the reality.Paul McBride is the CEO of Prima Panama, S.A. Republished with permission. First published in the Prima Panama investor blog. Copyright Prima Panama.