An Environmental Problem: Palau to Restructure Tourism Sector In Response To Chinese Tourists

Newly-elected President of Palau, Tommy Remengesau, has announced plans to allow only five-star hotels to open in the bid for a new law promoting quality over quantity as the nation’s new tourism strategy. Remengesau, who has been reelected having held office from 2001-2009 and 2013 until the recent election in November, hopes the new law will be implemented within the first one hundred days of his term in office. Remengesau hopes that the move will reduce the number of visitors and subsequent negative impacts on the environment, whilst channeling money back into the local economy as tourists are expected to pay for more expensive hotels.  The move comes from the government following a drastic reduction in flights between Palau and China, in an effort to reduce large package tour groups from Mainland China which are notorious for not spending locally, as well as for having a negative effect on the environment.

Chinese tourists account for an overwhelmingly large percentage of visitors to Palau.  In recent years, numbers have jumped such that the potential environmental impact is at the forefront of the minds of many of the locals that comprise Palau’s tiny population of 18,000. As Nanae Singeo, managing director of the Palau Visitor’s Authority, stated in 2015, “we have never experienced this much tourism before and the magnitude is really giving us a lot of pressure. We are a very tiny country with scarce resources so this sudden increase is an unknown challenge for us.”

With tourism accounting for 85% of the Gross Domestic Product (GDP) of Palau, it is no wonder that many of the local hotels, restaurants and guides are increasingly orienting themselves specifically to the Chinese market, however Remengesau has made it clear that Palau does not want to become overly reliant on one market. Since early 2015, the Palau government has taken measures to limit charter flights from China and has introduced not only visa fees (USD 50), but an additional Environmental Impact Fee (USD 100), which is to be implemented from April 2017. Although the Environmental Impact Fee will result in a 10-20% extra travel cost for Chinese visitors, it is hoped that this will increase the exclusivity of holidays to Palau, given the nation sells itself to Chinese tourists on the strength of its unspoiled air and beautiful scenery. To date, the halving of the number of flights between Palau and China has already had the positive impact of increased tourism spending in the Pacific country, in a move also employed by other destinations hoping to attract tourists looking for exclusivity and unspoiled nature, such as Botswana and Bhutan.

According to Remengesau, the incoming law will have the additional environmental and monetary benefit of forcing high-end hotels that wish to open in Palau to design and build their own power back-ups, water treatment systems and perhaps even roads as required. In return, “the five-star hotels would receive necessary tax breaks and exemptions from the government making it a ‘win-win situation for Palau and the investor.” Remengesau has not, as of yet, made it clear where exactly he would like any new five-star hotels to be built, but with hundreds of islands in Palau, there is no shortage of options for potential investors. Whether the hotels will be built sustainably remains to be seen.

COTRI China Outbound Tourism Research Institute provides expert insights into the worldwide developments of China’s outbound tourism market. As Chinese outbound tourists are travelling to a large range of destinations, our publications cover a number of regions, providing detailed insights and analysing visitor behaviour.

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Sources: Daily Mail, Straits Times, Travel Pulse, New Zealand Herald, The Telegraph, News.com.au.

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