Palau Sustainable Tourism Strategy 2025-2028

1. Introduction 1 1.1. Background and Purpose 1 1.2. Aligning with Palau’s National and State Planning 2 1.3. Aligning with the Global Tourism Context 3 1.4. Adopting a ‘Destination Management Partnership’ Approach 5

2. Sustainable Tourism Strategy Framework 7 2.1. Tourism Vision for Palau 7 2.2. Sustainable Tourism Strategy Guiding Principles 8 2.3. Sustainable Tourism Strategy Goals 8

3. State-Based Destination Analysis 9 3.1. State Destination Profiles 9

4. Country-Level Tourism Situation Analysis 27 4.1. Tourism Demand 27 4.2. Tourism Supply – Accommodation 34 4.3. Tourism Supply – Products and Visitor Experiences 37 4.4. Air Access and Infrastructure 39 4.5. Local Public Infrastructure and Services 41 4.6. The Tourism Workforce 46 4.7. Conditions for Private Sector Investment in Tourism 48 4.8. Environmental, Cultural and Social Considerations for Tourism 50 4.9. Tourism Governance and Stakeholder Collaboration 53

5. Objectives, Priorities and Activities 2025–2028 56 5.1. Objectives 56 5.2. Priorities & Activities Theme 1: Destination Management Structures and Systems 57 5.3. Priorities & Activities Theme 2: Tourism Supply – Products, People, Access, Infrastructure 61 5.4. Priorities & Activities Theme 3: Supporting Conditions for Sustainable Tourism Development 69 5.5. Priorities & Activities Theme 4: Destination Marketing and Distribution 74 5.6. Top 10 Priorities for Year 1 of the Strategy 76 Appendices 77 Appendix 1. Strategy Development Process 77 Appendix 2. Resource List 78 i • Palau Sustainable Tourism Strategy 2025–2028 Abbreviations BCBP Bureau of Customs and Border Protection MSME micro, small, and medium-sized enterprise BCHP Bureau of Cultural and Historical Preservation MSP Marine Spatial Plan BCI Bureau of Curriculum and Instruction NDBP National Development Bank of Palau BHR Bureau of Human Resources NIIP National Infrastructure Investment Plan BMT Bureau of Marine Transportation NSWMP National Solid Waste Management Plan BOA Bureau of Agriculture OCC Office of Climate Change BOAV Bureau of Aviation OLC Office of Labor Compliance BOC Bureau of Communications PAN Protected Areas Network BOD Bureau of Development PCC Palau Community College BOE Bureau of Environment PCCP Palau Climate Change Policy BPH Bureau of Public Health PCOC Palau Chamber of Commerce BPS Bureau of Public Safety PCS Palau Conservation Society BPW Bureau of Public Works PDP Palau Development Plan BSO Bureau of School Operations PEFG Palau Entrepreneurs for Growth DCIP Division of Capital Improvement (in BPW) PEWA Palau Energy and Water Administration DIMS destination information management system PIAC Palau International Airport Corporation DMPSC Destination Management Partnership PICRC Palau International Coral Reef Center Steering Committee PICs Pacific island countries EQPB Environmental Quality Protection Board PNOC Palau National Olympic Committee FIB Foreign Investment Board PPUC Palau Public Utilities Corporation FPNMS Friends of Palau National Marine Sanctuary PVA Palau Visitors Authority KBRUDSAP Koror–Babeldaob Island Resilient Urban RTPF Responsible Tourism Policy Framework Development Strategy and Action Plan SBDC Small Business Development Center KSG SWMO Koror State Government Solid Waste Management Office SHRM Society for Human Resource Management (Palau) MHHS Ministry of Health and Human Services TDSP Tourism Development Support Program MHRCTD Ministry of Human Resources, Culture, Tourism and Development USGS United States Graduate School MOJ Ministry of Justice WIOA Workforce Innovation and Opportunities Act MPII Ministry of Public Infrastructures and Industries ii Palau Sustainable Tourism Strategy 2025–2028 Foreword Forward & Upward: Palau Sustainable Tourism Strategy 2025–2028 Over the last few years, our administration has worked to ensure A Kot a Rechad er Belau — putting Palauan people first. This extends to all we do, including tourism, which has been the primary engine of our economy for decades. We’ve learned some lessons along the way, among them, that more isn’t always better. Too many visitors, especially those unaware of how deeply our environment is tied to our identity, risk damaging the very paradise they come to experience. From ridge to reef, our island home has sustained us with food, shelter, and cultural connection. Crowded dive sites, overused beaches, and degraded ecosystems hurt both our environment and visitor experience. We need a new way forward — and this four-year roadmap provides it. The Palau Sustainable Tourism Strategy 2025–2028 aims to educate our guests, protect what makes Palau special, and empower our people to benefit from tourism in more meaningful ways. It includes measures to support micro, small, and medium-sized enterprises (MSMEs), helping Palauans access the tools and financing needed to launch and grow resilient tourism businesses. This strategy is the result of deep collaboration — with national and state governments, NGOs, the private sector, and communities. It reflects a shared vision: to build a tourism industry that fosters pride among our people, earns respect from our visitors, and inspires our neighbors to do the same. What helps make this strategy unique is its blend of tradition and innovation to promote sustainable tourism. In the past two years, as we’ve restored and expanded airline services to Palau, we’ve also enhanced tourist experiences. Most recently, we celebrated the opening of Ngerchebai, a rock island off Aimeliik State, offering natural beauty and sustainable recreation. Airai State has launched new land- and culture-based tours, including hikes to historic sites and traditional performances and meals. These were based on post-COVID data showing tourists seek authentic experiences. Efforts are also underway to create an app that measures carbon footprints, educating both locals and visitors on environmental impact. These initiatives deepen the meaning of the world-renowned Palau Pledge, which calls on all visitors to respect and protect our island home. This approach prizes environmental stewardship and our cultural value of kede kaukerreu — caring — over consumption. Palau is charting a path toward a more thoughtful, more regenerative form of tourism. With this strategy, we say: Welcome to Palau — we hope you do more than just visit, we hope you accept our invitation to be part of something greater. Surangel S. Whipps, Jr. President of the Republic of Palau Palau Sustainable Tourism Strategy 2025–2028 iii Minister’s Note It is with great joy that I present the Palau Sustainable Tourism Strategy 2025–2028. This document represents a culmination of over a year of dedication, collaboration, and meticulous planning, marking a new chapter in Palau’s journey toward sustainable tourism development. The compilation of this strategy began in January 2024. Over the course of a year, it has become a comprehensive tourism strategy for our Republic. It carefully integrates the priorities of our diverse partners and stakeholders, bridging community level aspirations to national-level goals. I wish to express my deepest appreciation to the Asian Development Bank/Pacific Private Sector Development Initiative for their valuable support in making this strategy possible. Their technical guidance, expertise, and commitment to sustainable development have been instrumental in shaping the framework of this sectoral plan. I also extend my deepest gratitude to all those who have contributed to this endeavor—past collaborators who laid the groundwork, present partners who worked tirelessly to bring this vision to life, and future contributors who will help realize its full potential. This document is not merely a plan but a shared commitment to ensure that Palau’s tourism sector remains a vital, thriving, and sustainable part of our Pristine Paradise. Palau. With this, let us acknowledge the spirit of the Palau Pledge, and unite in a solemn vow to be stewards of our ocean, our land, our identity, and continue to safeguard and nurture our cultural heritage, ensuring its eternal legacy for generations yet to come. Thank you. Ngiraibelas Tmetuchl Minister of Human Resources, Culture, Tourism, and Development iv Palau Sustainable Tourism Strategy 2025–2028 Executive Summary Background Blue Prosperity Plan was setting to fulfill this purpose. Led by the the scene for sector consideration MHRCTD, with technical assistance in marine spatial planning. A new from the Pacific Private Sector In 2023, the Ministry of Human strategy for tourism was needed, giving Development Initiative (PSDI),1 the Resources, Culture, Tourism and consideration to lessons from the past strategy was informed by several Development (MHRCTD) embarked on and an assessment of the present months of research and consultations developing a new sustainable tourism to set a medium-term direction for involving national government agencies, strategy for Palau. The Responsible tourism. Specifically, one that recovers state governments, the private Tourism Policy Framework 2017–2021 and sustains the sector without sector, NGOs, and communities. The had served an important purpose, compromising the well-being of ‘destination management partnership’ but had expired. By 2022, Palau’s Palau’s places and people. approach adopted in the strategy’s tourism industry was emerging from development partnership will be the significant disruption of the global This Sustainable Tourism Strategy central to its implementation. COVID-19 pandemic and the Palau 2025–2028 was developed in 2024 The Sustainable Tourism Strategy (STS) Framework The long-term aspiration for tourism Vision as expressed by local tourism stakeholders The conditions that the The measurable impacts Guiding Principles STS should adhere to in Goals that the STS should deliver support of the vision in support of the vision The outcomes that the STS aims to achieve that directly Objectives support the goals and guiding principles Strategic How to achieve the objectives: the ‘what’, ‘when’, and ‘who’ Priorities & of strategy implementation Activities Designed to achieve the goals, guiding principles, and vision. Informed by an evidence-based situation analysis to identify the successes to continue, problems to solve, and opportunities to pursue. 1 PSDI is a regional technical assistance facility cofinanced by ADB, the Government of Australia, and the Government of New Zealand. Palau Sustainable Tourism Strategy 2025–2028 v Executive Summary Vision The long-term shared vision for tourism in Palau is: Palauans will feel pride in our pristine paradise – nurturing our home and presenting our environmental and cultural attributes to visitors who share our values. Visitors will respect our pristine paradise – valuing our environment and culture and contributing to our nation’s sustainable future. The international community will be inspired by our pristine paradise – recognizing Palau as the world’s leading sustainable tourism destination. Guiding Principles Goals The long-term vision for tourism in Palau is underpinned Six measurable goals for tourism are to be achieved by seven guiding principles. These principles express by the end of the term of this strategy. the conditions for tourism development in the next four years, based on the predominant values and intentions Goal 1 expressed by tourism stakeholders in Palau during the Attract visitors at a sustainable pace and level. development of this strategy. Goal 2 ❶ Tourism will be inclusive of all Palauans. Grow the high-spend, low-impact traveler segment. ❷ Tourism development will occur at a pace to be self-determined by Palauans. Goal 3 Increase tourism’s economic contribution to Palau. ❸ Tourism will be environmentally sustainable. ❹ Tourism will help preserve Palauan culture through Goal 4 culturally sensitive, authentic expression. Grow Palauan-owned tourism-related businesses. ❺ Tourism will be socially responsible. Goal 5 ❻ Tourism will build the resiliency of people and places. Increase Palauan employment in tourism. ❼ Tourism will bring state and national governments, the private sector, and the community together to Goal 6 pursue a shared vision for the future. Grow community support for tourism. vi Palau Sustainable Tourism Strategy 2025–2028 Executive Summary Objectives 14 outcome-level objectives will be progressed through this strategy to achieve the goals. Representing four key themes, they have been informed by extensive research and analysis at both state and national levels. 4 Objective Themes 14 Outcome-Level Objectives Destination Establishing tourism governance structures and coordination mechanisms 1. that enable effective leadership and multi-stakeholder collaboration in Management sustainable destination management. Structures and Systems 2. Strengthening research and information management systems that support evidence-based sustainable destination managment. 3. Providing accommodation that meets the expectations of high-value tourists and authentically represents Palau.

4. Delivering a variety of sustainably managed, world-class marine visitor experiences that are valued by residents and tourists alike. Tourism Supply: Growing the supply of sustainably managed terrestrial visitor experiences 5. based around Palau's natural and cultural attributes. Products, People, Access and Building a skilled tourism workforce that meets industry needs and provides Infrastructure 6. decent work opportunities for interested Palauans. Providing internationally competitive transport infrastructure and services 7. that make Palau, and its tourism-ready locations, accessible to target markets. Progressing sustainable and resilient tourism-enabling public infrastructure 8. and services that support both visitors and residents.

9. Managing appropriate controls, advice, and monitoring mechanisms that ensure tourism development in Palau is environmentally, culturally, and socially sustainable. Supporting Creating a business environment that enables micro, SME, and large private Conditions for 10. sector investment in sustainable and resilient tourism ventures. Sustainable Developing linkages between tourism and other sectors that deliver Tourism Sector 11. community benefits without community burdens. Development

12. Fostering a tourism-aware community that ensures visitors feel welcome and safe, and residents feel respected and safe. Destination 13. Managing a destination brand that represents Palau and presents a compelling proposition to high-value, low-impact travelers. Marketing and Distribution 14. Undertaking evidence-based marketing activity that serves to convert high-value, low-impact traveler interest to bookings. These objectives will be progressed during the life of this strategy by implementing 63 defined strategic priorities and a series of associated activities. The strategic priorities will serve as outcome-level performance indicators to be evaluated at the end of the strategy, and the activities will serve as annual output-level performance indicators. Palau Sustainable Tourism Strategy 2025–2028 vii Executive Summary Top 10 Priorities for Year 1 While all strategic priorities and activities are important for achieving the goals and objectives, it makes sense to identify the highest priorities to mobilize the strategy in its first year. Following are the top 10 foundational strategic priorities deemed to be the most critical to focus on as the strategy commences implementation in 2025. ❶ Ratify a national–state whole of government commitment to tourism as a priority sustainable economic sector for Palau. ❷ Form a Destination Management Partnership Steering Committee (DMPSC)— a cross-agency, national–subnational, and public–private–community representative task force—to facilitate the multi-stakeholder coordination required to implement and monitor the STS. ❸ Reorganize the national institutional arrangements for tourism (i.e., PVA and BOT) to ensure a more efficient and effective performance across contemporary destination management functions. ❹ Formalize a tourism development support program (TDSP) for states to access resources in developing and mobilizing tourism plans/priorities. ❺ Design, develop, and maintain a system for sourcing, storing, and utilizing destination management data. ❻ Identify tourism and hospitality skills gaps, training needs, and foreign workforce needs. ❼ Establish a register of products and experience development priorities for Palau’s current and prospective marine and terrestrial tourism sites. ❽ Define and manage carrying capacity volumes for the most visited tourism attractions in environmentally and culturally sensitive locations. ❾ Design and launch a minimum standards program for accommodation and tour operators that will ensure in the future that only those meeting minimum requirements for quality, safety, and sustainability can operate. ❿ Introduce a process for monitoring and measuring sustainable destination management in Palau by drawing on various partners’ data assets. At the end of the first year and based on progress made, a new set of highest priority activities will be determined for the following year, and each year thereafter. viii Palau Sustainable Tourism Strategy 2025–2028

1. Introduction In this context, this Sustainable Tourism term, many directions will remain 1.1. Background Strategy (STS) was commissioned by relevant while some aspects will have and Purpose Palau’s Ministry of Human Resources, been adjusted. At the end of 2028, it Culture, Tourism and Development is also likely that we can extend this Our island nation has long recognized (MHRCTD) to learn from the past and strategy with updated insights informing the role of tourism in developing our take stock of the present in setting a revised priorities and activities. economy while promoting our culture, medium-term direction for tourism in history, and natural blessings to the Palau; specifically, one that recovers The development of the STS world. However, when the mid-2010s and sustains this economic sector involved extensive consultations with saw tourism arrivals grow at too fast without compromising the well-being representatives of the national and a pace and too high a volume, we of our places and people. state governments, the tourism private recognized the need to pause growth sector, and the broader community in and reflect on what tourism in Palau The STS steers tourism development Palau throughout 2024. It also involved should look like in the future. in Palau toward a long-term shared a desk study of resources relevant vision for the sector. It does so by to Palau and the global travel and The Palau Responsible Tourism Policy following a strategic framework of tourism context and drew on insights Framework (RTPF) 2017–2021 was guiding principles, goals, objectives, from sustainable tourism development developed to reset the direction. It priorities, and activities from 2025 experts. Importantly, the development served an important purpose at the to 2028. A four-year strategy is of the strategy was Palauan-led. It was time—curbing a trajectory toward conducive to a tourism sector facilitated by a project team comprising overtourism. The RTPF led to many emerging from a disruptive decade local and international consultants and outcomes demonstrating Palau’s and within the context of pandemic- staff from the Bureau of Tourism (BOT) commitment to responsible tourism recovery conditions still unfolding, and Palau Visitors Authority (PVA).2 management, including but not limited notwithstanding that it will be Information and views generously to encouraging community-led tourism monitored and revised as needed provided by Palau’s tourism leaders and local entrepreneurship, protecting to reflect changing conditions. It is and industry participants have shaped the environment, and pursuing high- likely that by the end of the strategy’s the strategy’s direction. value (rather than high-volume) tourism markets. While many RTPF objectives remain relevant today, it is timely to reflect on learned lessons from successes and challenges in its implementation, taking into account how the state of play for tourism in Palau and globally has changed over the past several years. At the time of writing, Palau is yet to recover from the near collapse of its tourism industry during the global COVID-19 pandemic, with visitor numbers at a level last seen in the early 1990s. 2 Consultants from the Asian Development Bank (ADB) and ADB-managed Pacific Private Sector Development Initiative. Palau Sustainable Tourism Strategy 2025–2028 1

1. Introduction 1.2. Aligning with destination development. During the reassess a strategy for tourism issues development of this strategy, state with an emphasis on tapping the Palau’s National master plans (past, draft, and current) growth potential of Babeldaob. The and State Planning were reviewed to identify each state’s STS progresses this and provides a vision and priorities—overall and foundation for further development The development of this strategy for tourism where specified. The across Babeldaob. involved identifying alignment with the ecotourism plans prepared by four following national and state plans. states and available conservation area Palau Climate management plans were also reviewed Change Policy The Palau Development (Appendix 2). The Palau Climate Change Policy (PCCP) Plan 2023-2026 Revision (2025)—currently in its final Palau National Infrastructure The STS supports the overarching vision stages of development by the Office Investment Plan 2021-2030 for the Palau Development Plan (PDP) of Climate Change (OCC) within the 2023–2026: “To substantially enhance The Palau National Infrastructure Office of the President—underscores the quality of life of current and future Investment Plan’s (NIIP) recognition that Palau’s commitment to addressing the generations of Palauans.” It also “further tourism growth would place multifaceted impacts of climate change. supports the PDP’s goal and strategies a strong demand on increased public Building on the foundation of the 2015 for tourism, notwithstanding the need infrastructure in the form of access PCCP, the updated policy will continue to revise down the visitor arrivals target roads, improved airstrips and air links, to serve as a critical framework for of 150,000 in the short term based on and extended utilities” is central to the fostering resilience and sustainability more recent data and analysis. analysis and priorities identified in this across various sectors, including tourism. strategy.5 Specifically, the infrastructure- In alignment with this national directive, The PDP goal for tourism: “To recover related situation analyses (Sections 4.4 the Bureau of Tourism will collaborate the number of value-adding tourism and 4.5) cite the NIIP’s tourism issues closely with the Office of Climate Change visitors to over 150,000 per year3 and and tourism-related priorities and plans to integrate climate-resilient strategies to ensure that Palau remains a pristine for major investments in Palau over the for the tourism sector. paradise and is a destination that next ten years (noting any that have meets visitor expectations, and delivers since been updated in the PDP). National Ministry/ value added to the country including Agency Strategic Plans delivering community benefits.” Koror–Babeldaob As tourism relies on—and impacts— Island Resilient Urban The PDP strategy for tourism: “In other economic and social sectors, a the interest of ‘A Kot a Rechad er Development Strategy and range of national plans were reviewed Belau. People’s First,’ the strategy for Action Plan 2020–2030 to check alignment with tourism Palau tourism is for the government, The STS also responds to the key issues touchpoints and identify gaps to be businesses, and all Palauans to for tourism identified in the Koror– addressed in the future (Appendix 2). better understand the nature and Babeldaob Island Resilient Urban the means to developing a Palau Development Strategy and Action Palau Marine Spatial Plan tourism industry that adds value to the Plan (KBRUDSAP) 2020–2030: “(i) the (in development) country’s environment, society, culture, sustainable development, maintenance, This strategy has been developed as governance, and economy and to help and marketing of tourist attractions on part of the marine spatial planning steer the industry towards those aims.”4 Babeldaob Island, (ii) most hotel and (MSP) process initiated in 2022 under accommodation facilities are foreign- the Palau Blue Prosperity Plan to State Master Plans and owned, and (iii) tourism employment achieve the national vision to “Protect Tourism/Related Plans relies significantly on international the Ocean, Provide for People.” The STS migrant labor.” Noting the downturn serves as the tourism sector input to As the owners of Palau’s main tourism in tourism at the time the KBRUDSAP the Palau Marine Spatial Plan. assets, the states’ plans for tourism was written (during the COVID-19 are integral to a strategy that serves as pandemic), it identified the need to a national framework for sustainable 3 Palau Development Plan (PDP) 2023–2026. p. 118. The figure of 150,000 was set in 2023, although a target year was not defined. Based on data available since then, visitor arrival targets have been revised for this strategy (Section 2.3). 4 Palau Development Plan (PDP) 2023–2026. p.120. 5 Palau National Infrastructure Investment Plan (NIIP) 2021–2030. p. 38. 2 Palau Sustainable Tourism Strategy 2025–2028

1. Introduction 1.3. Aligning with walk in nature, an immersive experience such as “forest bathing,” or an intensive the Global Tourism activity to challenging oneself against Context the elements. Well-being travel can involve spending time in nature to relax The most relevant global travel and reflect, attending a yoga retreat, or and tourism insights for Palau, as visiting a spa. Other travel trends include synthesized from multiple market doing purposeful activities to give back research and commentary sources, to society, such as volunteering, and are summarized in this Top 10 list.6 long-stay trips so one can experience life as a local. This is evident in the

1. There is a growing and rise of the digital nomad—travelers evolving demand for legitimate who work remotely. These and other sustainable tourism destinations personally transformational travel and experiences. experiences personify contemporary Sustainable and responsible tourism tourism demand. are not new concepts, but mounting

3. There is increasing demand calls for “more action than words” from host destinations for have intensified since the COVID-19 high-value tourism and a pandemic. A growing number others have become less susceptible corresponding increase in of travelers are actively seeking expectations from high-value to uncertainty, accepting that “the new destinations that uphold sustainable tourists for destination quality, normal” means not holding off travel tourism principles, as well as travel authenticity, and value for money. plans. Adventure travelers, such as products and services that demonstrate scuba divers, and young independent While there is no universally accepted travelers are often cited to be less sustainable tourism credentials. Some definition of “high-value tourism,” the sensitive to uncertainty. Trends for such travelers are willing to pay a premium term is commonly used in the context travel behaviors will become clearer for this, but many also expect evidence of targeting “high-value, low-impact” with more research. of sustainable practices and outcomes. travelers. These are travelers who spend Likewise, a growing number of host more (e.g., by staying longer and being 5. There is ongoing uncertainty communities are demanding that tourism willing to pay for more experiences) about pandemic-recovery rates be more sustainably managed to protect and do less harm to the destination in some destinations. their environment, culture, and economy. (e.g., through behavior that shows Some destinations, such as Fiji, have They are holding tourism leaders and they respect and value local places and made remarkable recoveries from the tourists accountable for their roles in people). As many tourism destinations pandemic due to successful marketing ensuring sustainable practices. are pursuing high-value tourism, combined with other favorable

2. The aim of travel is competing in this market requires influences. However, other destinations becoming less about sightseeing delivering what these travelers expect: have not yet recovered to their 2019 and more about engaging in a sufficient supply of quality, sustainable, visitor arrival levels. In some cases, it an experience (especially one and value-for-money travel experiences. is still too soon to determine recovery based on nature, well-being, giving back, living like a local, or 4. Recent global shocks and growth rates, especially given the other transformational purpose). and ongoing uncertainty are prevailing economic environment, impacting travelers behaviors geopolitical situation, and local During the pandemic, nature-based and in different ways. circumstances. While this uncertainty well-being travel were dominant themes makes it difficult to develop tourism in consumer research about future travel The pandemic led to many people plans with reliable visitor forecasts, intentions. Both themes continue to becoming more cautious about booking it also highlights the importance of drive market demand, and while closely travel in uncertain times. For some creating flexible plans that can be linked, each also has a broad profile. travelers, this has been reinforced by revised as new data and trends Nature-based travel can include a gentle challenging economic conditions and become available. geopolitical instability. Conversely, 6 List compiled by the author based on anecdotal insights from PSDI projects as well as published research, including but not limited to: PSDI. 2021. Looking For- ward Vol 1. Evaluating the Challenges for Pacific Tourism After COVID-19; World Bank. 2022. The Future of Pacific Tourism; and various market research reports shared online by travel companies (e.g., Amadeus, American Express, Booking.com, Expedia, Skift, Trip Advisor, Trip.com). Palau Sustainable Tourism Strategy 2025–2028 3 1. Introduction

6. There are intensifying and processes for engaging interested demand, and monitoring data, destination efforts to strengthen community members in tourism, and (iii) use virtual reality (VR)/augmented and formalize destination their representation in policy and reality (AR) to market or deliver management. planning decisions, all ensure the local visitor experiences, and (iv) use other During the 2010s, many destinations population is no longer on the periphery innovative applications. began adopting a more holistic of tourism. They are now central to destination management. 10. There is growing interest approach to tourism development, in regenerative tourism but a taking into account the needs of 8. The increasing emphasis on mixed understanding of what residents, business owners, and resilience in tourism is matched that means. visitors—both current and future. This by growing questions about In simple terms, a regenerative recognition of the multiple functions what this means in practical terms. approach to tourism places the living and stakeholders involved in tourism “Tourism resilience” is a subject of system in which tourism operates— spurred a new wave of governance considerable research and commentary. its places and people—at the center structures. Traditional DMOs A Google search for “What is tourism of decision-making about tourism (destination marketing organizations) resilience?” in late 2024 produced and related activities. This concept evolved into more contemporary about 85 million references. While reflects principles embedded in many DMOs (destination management this topic is highly relevant and indigenous cultures. Regenerative organizations), extending their essential to all destinations, many tourism is often described as leaving mandate accordingly. Additionally, new tourism stakeholders often struggle the environment, culture, and economy governance arrangements emerged with it means in practical terms. better than before—going beyond the to better engage and represent all Beyond the broad understanding that sustainable tourism goal to “sustain” local stakeholders, including public, tourism resilience involves preparing them. However, there is considerable private, and community interests. for the impacts of climate change, debate about what it means and how to PSDI research has identified that natural hazards, external shocks (e.g., demonstrate a legitimate regenerative Pacific island countries (PICs) seek economic, geopolitical, health), or approach. While many destinations to improve destination management internal crises (e.g., economic, political, aspire to this tourism model, they are by strengthening all tourism-related civil instability), PSDI consultations advised to avoid adopting the term functions and optimizing coordination have found that many tourism business solely for marketing purposes. Instead, among relevant stakeholders.7 However, owners, host communities, and sector they should understand the principles the research has also found that due to leaders seek practical ways to build behind it and commit to engaging host the unique nature and scale of tourism resilience into tourism planning. communities in determining a pathway in PICs, there is no ideal, one-size- for tourism, allowing those communities fits-all DMO model to adopt. Instead, 9. Digital technology has to determine the manner and pace a tailored, homegrown solution is a rapidly expanding role of development. needed to achieve optimal destination in tourism. management based on the local Digital technology impacts multiple context and available resources. aspects of tourism, and its influence

7. There is a growing is rapidly evolving. Travelers are representation of host increasingly using smartphones, the communities in tourism internet, booking platforms, and decisions. mobile apps to plan and book their Tourism leaders are increasingly trips. As a result, tourism destinations recognizing the role that host and suppliers must keep pace with communities can—and should—play technological advancements to in informing tourism planning, making provide real-time data and undertake tourism development decisions, and digital marketing and sales. To remain monitoring the impacts of tourism. competitive, many are investing in The introduction of community technology that allows them to (i) apply sentiment surveys, the establishment artificial intelligence tools to customize or adaptation of informal/formal bodies content for clients, (ii) maintain live information systems to manage supply, 7 PSDI defines five broad destination management functions: planning, development, marketing, delivery, and monitoring. 4 Palau Sustainable Tourism Strategy 2025–2028

1. Introduction 1.4. Adopting a ‘Destination Management Partnership’ Approach This strategy recognizes that for tourism to be sustainable in economic, environmental, and social terms, it requires effective destination management. This requires all tourism stakeholders to work together as destination management partners. Box 1. Destination Management The system comprises: in Contemporary Tourism • Five key destination management functions: “Destination management” is not a new term, but it is 1. Destination planning increasingly being used in contemporary tourism dialogue 2. Destination development to shift focus from tourists and tourism business owners to include the destination’s places and people. 3. Destination marketing

4. Destination delivery The description of ‘responsible and sustainable destination management’ by the World Tourism Organization reflects 5. Destination monitoring this: “(It) should entail a process that effectively and harmoniously addresses the interactions between the • Multiple destination management partners. visitors, the industry that serves them, the community that These are the leaders and/or supporters of the hosts them and the environment in a broad sense (natural above functions, which include national tourism and cultural resources)…Destination management takes a offices, other national and subnational government strategic approach to link-up the sometimes very isolated offices that have touchpoints with tourism, the private and occasionally diverging elements for the better planning sector, NGOs, host communities, distribution partners, and management of the destination; calling for a coalition donors, and visitors. of many organizations and interests working towards a • Destination management architecture. common goal.”* This includes the institutional arrangements, The ADB’s Pacific Private Sector Development Initiative governance mandates, and coordination mechanisms (PSDI) has developed a model for destination management that influence how partners engage across systems relevant to Pacific island nations’ contexts.† these functions. * World Tourism Organization. 2019. UNWTO Guidelines for Institutional Strengthening of Destination Management Organizations (DMOs) – Preparing DMOs for New Challenges. Madrid: UNWTO. p. 10. † PSDI Draft Working Paper. December 2024. Palau Sustainable Tourism Strategy 2025–2028 5

1. Introduction The development of this strategy considered a holistic “destination management system” model (Box 1), focusing on the partners that should be involved in decision-making regarding the future of tourism in Palau. Building and maintaining partnerships across Palau’s public sector (national and state), private sector, NGOs, and community stakeholders was central to developing this strategy and will be critical in its implementation. This is represented by the Belau Destination Management Partnership model (Figure 1). This approach recognizes that while the MHRCTD and its designated tourism agencies—the Bureau of Tourism and Palau Visitors Authority—have lead roles for many tourism development functions in the implementation of this strategy, they also have a role in (i) convening other stakeholders best suited to deliver specific priorities, and (ii) supporting other stakeholders who have the mandate to lead functions that enable tourism. Figure 1. The Belau Destination Management Partnership National State Government/ Governments Semi-Government Agencies Belau Destination Management Partnership (DMP) Private Sector Community Local Environmental NGOs People of Palau Tourism Business Owners External Partners Development partners, e.g., donor agencies, international NGOs, and other external supporters. 6 Palau Sustainable Tourism Strategy 2025–2028

2. Sustainable Tourism Strategy Framework The Sustainable Tourism Strategy begins with a long-term vision for tourism in Palau, shaped by the insights gathered from the tourism industry and community stakeholders in 2024. The strategy is built within a hierarchical framework of guiding principles and goals, supported by objectives, strategic priorities, and activities (Figure 2). Figure 2. STS Framework The long-term aspiration for tourism Vision as expressed by local tourism stakeholders The conditions that the The measurable impacts Guiding Principles STS should adhere to in Goals that the STS should deliver support of the vision in support of the vision The outcomes that the STS aims to achieve that directly Objectives support the goals and guiding principles Strategic How to achieve the objectives: the ‘what’, ‘when’, and ‘who’ Priorities & of strategy implementation Activities Designed to achieve the goals, guiding principles, and vision. Informed by an evidence-based situation analysis to identify the successes to continue, problems to solve, and opportunities to pursue. 2.1. Tourism Vision for Palau Vision The long-term shared vision for tourism in Palau is: Palauans will feel pride in our pristine paradise – nurturing our home and presenting our environmental and cultural attributes to visitors who share our values. Visitors will respect our pristine paradise – valuing our environment and culture and contributing to our nation’s sustainable future. The international community will be inspired by our pristine paradise – recognizing Palau as the world’s leading sustainable tourism destination. Palau Sustainable Tourism Strategy 2025–2028 7

2. Sustainable Tourism Strategy Framework 2.2. Sustainable Tourism 2.3. Sustainable Tourism Strategy Guiding Principles Strategy Goals Guiding Principles Goals The long-term vision for tourism in Palau is underpinned Six measurable goals for tourism are to be achieved by seven guiding principles. These principles express by the end of the term of this strategy. the conditions for tourism development in the next four Goal 1 years, based on the predominant values and intentions expressed by tourism stakeholders in Palau during the Attract visitors at a sustainable pace and level.8 development of this strategy. Goal 2 ❶ Tourism will be inclusive of all Palauans. Grow the high-spend, low-impact traveler segment. ❷ Tourism development will occur at a pace to be self-determined by Palauans. Goal 3 Increase tourism’s economic contribution to Palau. ❸ Tourism will be environmentally sustainable. ❹ Tourism will help preserve Palauan culture through Goal 4 culturally sensitive, authentic expression. Grow Palauan-owned tourism-related businesses. ❺ Tourism will be socially responsible. Goal 5 ❻ Tourism will build the resiliency of people and places. Increase Palauan employment in tourism. ❼ T ourism will bring state and national governments, the private sector, and the community together to Goal 6 pursue a shared vision for the future. Grow community support for tourism. Setting targets for goals and measuring results These goals have been adopted because stakeholders believe they are important indicators of the strategy’s success. However, setting targets and measuring results is easier for some goals than for others. Table 1 presents a simple monitoring and evaluation matrix for the goals. This includes monitoring measures, baseline data (where available), targets (which should be revised annually), and sources of verification (allowing for new ways to measure).8 Table 1. Monitoring and Evaluation Matrix for STS Goals Goal Number and Targets Baseline Source of Verification Monitoring Measure Subject to annual review

1. International visitor arrivals (total #) CY2019 (pre-COVID): 93,700 CY2025: 69,000 Immigration data; PVA reports CY2024 (in recovery): 56,200 CY2026: 84,000 CY2027: 99,000 CY2028: 114,000 2. Visitors meeting the “high-value, No baseline available Increase year-on-year from International Visitor Survey (IVS) low-impact” visitor profile (% share) 2025 to 2028 questions and results filters. 3. Value of international visitor FY2019:9 $982 per arrival FY2028: $1,400 per arrival USGS and MOF economic receipts ($ per arrival) modeling and IVS 4. Palauan-owned tourism businesses No reliable baseline available Increase year-on-year once Various sources to be (total #)10 the baseline is established11 determined12

5. Palauan workers in tourism (total #) FY2019 (pre-COVID): 570 Increase year-on-year from USGS and/or MOF economic FY2023 (in recovery): 380 2025 to 2028 modeling 6. Community members who indicate No baseline available Increase year-on-year from Tourism Sentiment Survey support for tourism (% share) 2025 to 2028 The vision, guiding principles, and goals set the first part of the STS Framework. Achieving these requires supporting objectives, priorities, and activities—all of which must be based on robust evidence and analysis to ensure their legitimacy. Sections 3 and 4 provide this analysis, while Section 5 presents the remaining components of the STS Framework. 8 A “sustainable pace and level” is one evidenced to be possible from a market perspective, as well as preferred and possible from the destination perspective (Section 4.1). 9 United States Graduate School (USGS) financial year (FY) estimates. Although FY figures have been estimated up to FY2023, due to anomalies related to the pandemic period, FY2019 is considered the most reliable baseline. 10 To differentiate joint ventures from 100% Palauan-owned. 11 Baseline will be established after completing the current government exercise to distinguish front businesses from legitimate locally owned businesses. 12 BOT registry for tour operators; other government business registration sources. 8 Palau Sustainable Tourism Strategy 2025–2028

3. State-Based Destination Analysis • The states have a critical role in 3.1. State representing the interests of their Defining “Destination Development Stage” Destination Profiles residents on development matters. Categorizing states based on their • National tourism plans must current stage of tourism development— The Palau Sustainable Tourism Strategy reflect the states’ ambitions, in terms of the nature and scale of prioritizes the nation’s 16 states, needs, and plans. market-ready supply13 as well as levels recognizing that: of demand14—allows for a clearer • Many of Palau’s tourism sites of Extensive research and consultations understanding of their status relative natural, cultural, and historic value have been conducted to understand to other states. This helps in providing fall under state ownership. each state’s (a) current tourism offering, destination development support (b) vision for tourism, (c) planning and according to the specific needs at each • States determine the direction governance context, and (d) tourism stage. Figure 3 outlines the criteria used for tourism or other sector development priorities. The findings are to categorize each of Palau’s states. development, as outlined in their summarized in this section, presented master plans, land-use zoning, as a one-page destination profile for Assessing Tourism ecotourism plans, and other each state. Each profile also features Development Prospects state planning mechanisms. an assigned indication of the stage Each state profile also features a brief of destination development and an assessment of tourism development • Tourism development at public, assessment of tourism development prospects. This conclusion is based private, and clan-owned sites is prospects. This informs the objectives on observations from consultations subject to state laws. and strategic priorities for the national and research, taking into account tourism strategy, outlined in Section 5. the tourism development readiness indicators presented in Figure 4. Figure 3. Destination Development Stage Criteria ESTABLISHED EXPANDING EMERGING ENTRY-STAGE YET TO ENGAGE Tourism The state has an The state has some The state has a few The state is working The state has little Supply extensive supply of tourism products tourism products and on developing intention at this tourism products and experiences that experiences that are market-ready time to develop and experiences are market-ready market-ready and tourism products and market-ready that are market- and is working on intends to strengthen experiences based tourism products ready. strengthening and and/or grow that on its tourism sites/ and experiences. expanding supply. supply. attributes. Tourism All/most Many international Some international Few international Few international Demand international visitors visitors actively visitors actively visitors actively visitors actively actively engage with engage with tourism engage with tourism engage with tourism engage with tourism activity in activity in the state. activity, and the activity in the state. tourism activity the state. numbers are growing. in the state. Mapping states Koror Airai Ngaraard Aimeliik Ngatpang Ngeremlengui to their current Melekeok Ngarchelong Angaur Ngchesar stage of Peleliu Ngardmau Hatohobei Ngiual destination development Kayangel Sonsorol 13 “Market-ready” refers to a site/attraction meeting the needs of tourists within suitable site management conditions. Market readiness benchmarks differ by the type, location, popularity, and size of a site/attraction. It can be demonstrated through (i) the quality of onsite facilities (e.g., clean, functioning restrooms; comfortable, shaded rest stops; safe walking pathways; appealing presentation; and sufficient parking/access), and (ii) the quality of services (e.g., interpretive signage and/or expert guiding; regular and reliable opening hours; ease of booking; clear fee structure; good customer service; and sustainable practices). 14 Demand is measured by the level of “active engagement” by visitors as defined by participating in activities versus just passing through. Palau Sustainable Tourism Strategy 2025–2028 9

3. State-Based Destination Analysis Figure 4. State Tourism Development Readiness Indicators A. State Commitment B. State Tourism Supply C. Other Readiness Factors to Tourism i. Tourism is a priority economic i. The state has sites/experiences based on nature, i. There is strong community sentiment in sector (as stated in a vision/plan/ culture, or history that are market-ready tourism support of tourism. other). products—or have the potential to be. ii. Controls are in place to ensure tourism ii. The state has a documented plan ii. The state has a unique, compelling experience(s) development is done in a sustainable for tourism. that cannot be found in another state. manner. iii. The state allocates an adequate iii. The state has tourist accommodations within the iii. There are identified investment-ready budget for tourism development. state or within 90 minutes of travel. site(s) suitable for tourism and with secure land title(s). iv. The state has a Tourism Officer. iv. The state has transport infrastructure and services that make it easily accessible. iv. There are enough workers with the right skills to meet needs. Determining Spatial Destination Clusters The state destination profiles that follow are grouped into spatial destination clusters. This approach clusters neighboring states with complementary tourism attributes that can be easily connected by road or water, and whose leaders are willing to collaborate on tourism initiatives. It supports the development of tourism trails that (i) enhance the visitor experience, (ii) distribute visitor volumes to help mitigate the risk of overtourism at sites, and (iii) spread the economic benefits. It also encourages states to pool their resources and directs national resources toward achieving better outcomes in destination development. In line with these principles, the following clusters have been agreed by the states.15 Figure 5. Palau’s Geographic Tourism Clusters Airai and Koror Visitor Hub These form a logical cluster as Palau’s main tourism hubs are connected by the Japan–Palau Friendship Bridge. Koror and Airai are the most visited and advanced in tourism development. Far North They have been active in leading destination management at the state level. Cluster East Babeldaob Cluster (Ngchesar, Melekeok, and Ngiual) West These states have strong potential for collaborative tourism development due to geographic Babeldoab Cluster proximity and established infrastructure. Melekeok offers an accommodation base for visitors to explore the surrounding natural and cultural offerings. These states have the political will to work together. While the development of resorts in each state is not currently feasible, the states can deliver complementary visitor experiences that spread the visitor load and benefits of sustainable tourism. East Airai State Babeldoab West Babeldaob Cluster (Aimeliik, Ngatpang, Ngeremlengui, and Ngardmau) Cluster These states have established a strong foundation for collaboration via the Tmakiukl MOU, which fosters political will for cooperation in tourism development. Furthermore, Ngatpang, Ngeremlengui, and Ngardmau jointly manage the Ngermeduu Conservation Area. Together, these states are well Koror State positioned to enhance conservation-based tourism while managing visitor flows to preserve natural resources. Far North Coast and Islands Cluster (Ngaraard, Ngarchelong, and Kayangel) South Islands This cluster represents existing relationships between Ngarchelong and Ngaraard, and Cluster Ngarchelong and Kayangel. Complementary natural attractions, such as pristine beaches and marine life in Kayangel, cultural heritage sites in Ngaraard, and historic sites in Ngarchelong indicate opportunities for collaboration. Near South Islands Cluster (Peleliu and Angaur) Peleliu and Angaur have a deep cultural connection dating back to settlers from Angaur merging Southwest with Peleliu’s people to establish the Teliu hamlet. A 30-minute boat passage connects the Islands Cluster two states, and both have an airfield. Visitor access can be coordinated, supported by Peleliu‘s accommodation supply. Opportunities for collaboration lie in delivering war history tourism trails, with both states offering rich World War II sites. Far South Islands Cluster (Sonsorol and Hatohobei) Despite transport challenges and the migration of a large part of the population to Koror, these states can together tap into the growing demand for liveaboard experiences, which are already available in these regions. The political will to improve transportation could open up future opportunities around remote island adventure tourism, emphasizing exclusivity and the untouched nature of these islands. 15 This should not discourage states from collaborating with other partners where shared opportunities are identified. 10 Palau Sustainable Tourism Strategy 2025–2028

3. State-Based Destination Analysis Koror and Airai Visitor Hub Cluster Airai State Overview: Airai State, located adjacent to Koror, is attracting a growing number of tourists, with 500 to 700 visitors reported in recent years. As the first state in the Republic of Palau to endorse its products as part of the Alii Pass program, Airai has established a sustainable, community-based tourism initiative that offers visitors an authentic cultural experience while promoting Palauan traditions and practices. The state showcases traditional activities such as weaving, carving, food preparation, grass skirt demos, and taro farming, along with traditional dances in the Alii Pass tour. Future plans include expanding marine activities with rock island excursions and introducing eco- friendly huts. Vision for tourism: “In 10 years, Airai State has a robust Tourism Program and the State’s tourism industry has expanded to provide revenues for the State, job opportunities for residents of Airai who are increasingly involved in the industry, and it contributes to cultural and social preservation by balancing modern convenience with cultural living.” Tourism management: Tourism in Airai is managed by the state’s official tour guide, with tours booked in advance through PVA or the Airai Tourism Department.  State planning: Development has been guided by the Airai State Master Plan of 2010; however, Population: 2,529 (2020) an updated Airai State Master Plan 2023–2033 has been drafted and is awaiting finalization and legislature approval. Planning has also been guided by the Zoning Code of 2013, which designates Land mass: 55 km2 resort and visitor zones. Current Destination Stage: Conservation areas: Airai has one conservation area—Medal Ngediull Conservation Area. EXPANDING Registered historic sites: Airai has 23 registered historic sites, comprising various historic remains, caves, and landmarks. It also includes the Yapese Stone Money Quarry Sites, which is on the UNESCO World Heritage tentative list. Visitor Attractions Accommodation supply: Airai has two operational resorts with 91 rooms and two accommodations under construction. There are reportedly a few sites with potential for new project development. Terrestrial attractions Historic/Cultural sites: Tour operators/guides: There are six licensed tour operators based in Airai. • Bai ra Rengarairrai • Ancient stone pathways Assessment of tourism development prospects: Airai has promising development prospects for tourism. The state’s focus on high-quality, low-impact tourism and prioritization of local ownership • Chades ra Mechorei in accommodations lays a strong foundation for sustainable tourism. It would benefit from having (traditional causeway) a tourism department, strengthening local expertise and capacity, modernizing fee collection, • Kesebekuu (war canoe) expanding accommodations and visitor services, and strengthening branding and marketing efforts. The successful realization of the state’s tourism vision will hinge on addressing these needs. Future opportunities • Airai Rock Islands for marine activities and ecotourism State Tourism Priorities to Be Recognized in the Palau Sustainable • Airai hiking trails Tourism Strategy Î Destination management governance. Establishing a tourism department for tourism planning and management, including improving fee collection systems. Î Skills development. Building capacity for tourism through training. Î Visitor experience and product development. Expanding accommodations and visitor services and developing new cultural and nature-based products. Sources: Airai State Assessment in September 2024; Airai State Master Plan 2023–2033 (Draft); Airai State Master Plan (2010); and PVA data and printed/online information resources. Palau Sustainable Tourism Strategy 2025–2028 11

3. State-Based Destination Analysis Koror and Airai Visitor Hub Cluster Koror State Overview: Since Koror pioneered tourism for Palau in the 1980s, the state has established itself as the nation’s principal tourism destination. Blessed with the Rock Islands Southern Lagoon (RISL)—the nation’s only UNESCO World Heritage Site—Koror offers sustainable tourism experiences that draw visitors from all over the world. International tourists in Palau typically participate in activities in Koror, such as scuba diving, snorkeling, swimming, or sightseeing boat/land tours. Furthermore, an estimated 95% of tourists stay in Koror-based accommodation. Koror’s pioneering tour guide training and certification serves as a model for Palau. Vision for tourism: Currently, there is no documented state-specific vision for tourism; however, state representatives have indicated their intention for tourism to remain an important sector without becoming overdeveloped or unsustainable. Tourism management: Koror has a tourism information office and a full-time tourism officer, and is considering establishing a tourism department.  State planning: The Koror State Master Plan dates to 1976; however, its zoning laws provide spatial parameters for new developments. Koror does not have a state tourism plan but intends to prepare one in the near future. The RISL Management Plan 2022–2027 directs sustainable management of the site. Population: 11,119 (2020) Conservation areas: Koror has seven conservation areas, two of which are in the Protected Areas Land mass: 58 km2 Network (PAN). Only four sites can be visited, with strict conditions imposed. Current Destination Stage: Registered historic sites: Koror has 25 registered historic sites. Accommodation supply: Koror currently has 68 land-based properties, offering 1,750 rooms. This ESTABLISHED represents 85% of Palau’s total room inventory, which includes resorts, hotels, motels, bed and breakfast accommodations, and apartments. Koror is also the base for Palau’s eight liveaboards (70 rooms). An additional four land-based properties (230 rooms) are scheduled to open by the end of Visitor Attractions 2025. There are a few sites earmarked for future accommodation projects. Tour operators/guides: Koror has around 100 registered tour operators. Marine attractions • RISL sites, including Milky Way, Assessment of tourism development prospects: Koror already has intensive tourism activity at its Jellyfish Lake, the Arch, and marine sites, as well as tourism developments on land. Tourism expansion is limited by the carrying several well-known dive sites. capacities at RISL, although those limits have yet to be defined and can be offset by developing more visitor experiences to share the load. The expansion of accommodation supply is limited by Terrestrial attractions investment barriers such as low occupancy rates for existing facilities and a lack of suitable land, Historic/cultural sites: although there are reportedly a few investment-ready sites. Residents have also expressed concerns • 23 sites in the Palau National about tourism expansion, particularly due to the limited capacity of supporting infrastructure such as Register of Historic Places, sewage systems. Therefore, Koror’s short- and medium-term prospects for serving high-value tourism including natural, traditional, lie in (i) strengthening the quality and environmental controls for marine experiences, (ii) improving colonial, and war history sites the quality of existing accommodations, (iii) investing in supporting infrastructure, and (iv) developing such as caves, terraces, stone more land-based tourism activities. Koror is well placed to achieve this with the state’s commitment monoliths/platforms, traditional to sustainable tourism, but it would also benefit from having a tourism department and tourism plan villages, a lighthouse, and to shape the future. a WWII bunker. Built attractions: State Tourism Priorities to Be Recognized in the Palau Sustainable • Belau National Museum Tourism Strategy • Belau Eco Glass (glass Î Infrastructure development (large- and small-scale). Ensuring sewage and waste management crafting center) meet current and future needs; pedestrian infrastructure (e.g., sidewalks, crossings, streetlights) • Art Museum to improve access, aesthetics, and safety. • Multiple restaurants Î Sustainable destination planning and monitoring. Determining the carrying capacities at sites in RISL. • Shopping options Î Visitor experience and product development. Developing new cultural tours and activities. Future opportunities Î Improving accommodation (reinvestment). Improving the quality of existing accommodation supply. • Potential to develop several new land-based, cultural visitor experiences (tangible and intangible). Sources: Koror State representatives (interviews); Koror tourism private sector and community stakeholders (consultations, survey, workshop); RISL Management Plan 2022–2027; and PVA data and printed/online information resources. 12 Palau Sustainable Tourism Strategy 2025–2028

3. State-Based Destination Analysis East Babeldaob Cluster (Ngchesar, Melekeok, Ngiual) Ngchesar State Overview: Ngchesar State, nestled on the eastern side of Babeldaob, is in the early stages of developing its tourism industry. It offers a tranquil and unspoiled environment with limited but meaningful visitor experiences. The state currently attracts a modest number of travelers seeking to explore its natural beauty, such as the Mesekelat River/Waterfall and the Ngelukes Conservation Area, alongside its cultural treasures, which include the oldest traditional war canoe in Palau. Vision for tourism: “In 10 years, Ngchesar has at least one thriving eco-cultural tour offered as a Signature Product, with enabling mechanisms that support low-impact, high-end tourism development that minimizes environmental and social impacts.” (Ngchesar State Master Plan 2024–2034) Tourism management: N/A  State planning: While the Ngchesar State Master Plan 2024–2034 has been prepared, it has not yet been adopted by the Ngchesar State Council. The plan includes the criteria for designated areas for tourism activities. Conservation areas: Ngchesar has two conservation areas—Ngelukes Conservation Area and Mesekelat Conservation Area, both PAN sites. While these areas already have policies and guidelines, Population: 319 (2015) there are many practices that need to be subjected to more policies and/or regulations in the near Land mass: 41 km2 future to help conserve and protect the natural, historic, cultural, and tourism sites. Current Destination Stage: Registered historic sites: Ngchesar has 10 historic sites, which include traditional villages, stone features, terraces, and historic remains. ENTRY-STAGE Accommodation supply: None at this time. Visitor Attractions Tour operators/guides: The state has one licensed tour operator. Assessment of tourism development prospects: Ngchesar State’s readiness for future tourism Marine attractions prospects is promising, with notable natural and cultural assets. However, expanding tourism in • Ngelukes Conservation Area line with the vision for low-impact, high-end, eco-cultural tourism will require (i) regulating tourism practices to ensure environmental protection, (ii) investing in infrastructure to connect trails and Terrestrial attractions improve access to key sites, (iii) ensuring a sufficient number of certified tour guides, (iv) engaging Historic/cultural sites: the community, (v) establishing effective tourism governance and planning, and (vi) developing • Beluu er a Ngeruikl tourism products and linkages. (traditional village) • Iliud er a Mesiual (stone platform) State Tourism Priorities to Be Recognized in the Palau Sustainable • Kabekel (war canoe) Tourism Strategy Nature-based sites: Î Destination planning. Developing a state eco-cultural tour product for low-impact, high-end tourism. • Mesekelat River/Waterfall Î Visitor experience and product development. Expanding marine activities to include kayaking and snorkeling. • Century Tree Î Tourism linkages. Increasing the visibility of handicrafts and package tours with locally prepared meals. Built attractions: Î Skills and workforce development. Implementing a state tour guide certification program to enhance • Karmaliang Dock service quality. • Tabrengesang Park Î Community engagement. Establishing a cultural tour of Ngersuul traditional village to engage visitors. Future opportunities Î Infrastructure development. Building trail bridges connecting key natural attractions like the Century Tree, Mesekelat River/Waterfall, and Jungle River. • Ngersuul traditional village cultural tour • Water activities e.g, kayak, Jet Ski, snorkeling Sources: Ngchesar State representatives (interviews, July 2024); Ngchesar State Master Plan 2024–2034 (Draft); and PVA data and printed/online information resources. Palau Sustainable Tourism Strategy 2025–2028 13

3. State-Based Destination Analysis East Babeldaob Cluster (Ngchesar, Melekeok, Ngiual) Melekeok State Overview: Melekeok State has an expanding range of tourism offerings. Its marine lakes, significant cultural and historical sites, and the Capitol Building attract international visitors. The “Kingdom of the Northern Sky” tour exemplifies community-led tourism, offering visitors a journey from ancient villages to the modern Capital Building. In 2024, Melekeok became the first state in upper Babeldaob to establish a premium resort. This positions Melekeok—and its neighboring states—to unlock new opportunities for local communities to develop tourism products to serve more international visitors. The state is committed to growing the tourism sector while protecting its natural assets through conservation management plans. Vision for tourism: “Maximize the contribution of tourism to Melekeok’s economic development and self-sufficiency, through the appropriate balance of the conservation of Melekeok’s natural and cultural resources with their development for economic purposes.” (Melekeok State Master Plan 2023–2032 (Draft)) Tourism management: Melekeok has no tourism officer but plans to develop a tourism framework within the next 1–2 years to cover fees, maintenance plans, scheduling, training, customer service, and an overall tourism management plan.  State planning: Development has been guided by the Melekeok State Master Plan and Land Use Plan Population: 318 (2020) (2012). An updated Melekeok State Master Plan 2023–2032 has been drafted. The plan includes the criteria for designated areas for tourism activities, which will need to consider the risk of rising sea Land mass: 25 km2 levels. Melekeok also has plans for conservation areas (see below). Current Destination Stage: Conservation areas: Melekeok has two conservation areas—Ngardok Lake Reserve and Ngermedellim Marine Sanctuary. The Ngardok Nature Reserve has a management plan and is EXPANDING supported by a US National Parks initiative to develop a sustainable tourism plan. There are similar plans for the Ngermedellim Marine Sanctuary. Melekeok also enforces the Historical and Cultural Preservation Overlay and the Ngermedellim Marine Sanctuary Act. Visitor Attractions Registered historic sites: Melekeok has six registered historic sites, which are mainly land-based and consist of stone features and terraces. Marine attractions Accommodation supply: The newly built, high-end Sunrise Sea View Landison Retreat is the only • Ngermedellim Marine Sanctuary accommodation offered in Melekeok, with a capacity of 75 rooms. Together with Palau Beach (for snorkeling and diving) Bungalows, the total accommodation supply in Melekeok is 79 rooms. Terrestrial attractions Tour operators/guides: There are no tour businesses currently registered in Melekeok. Historic/cultural sites: • Did el Bad er a Beriber and Assessment of tourism development prospects: Melekeok is well positioned for medium- scale tourism growth in the short to medium term, especially with the recent opening of a new Odalmelech (stone features) international resort, which will boost accommodation capacity and create opportunities for local • Meteu el Klechem (dock) product development. However, there are challenges that need to be addressed, including limited • Bai Melekeong (traditional infrastructure, capacity for sustainable destination management, land use planning to account men’s meeting house) for rising sea levels, and workforce constraints. Melekeok can boost its appeal by partnering with • Korean Memorial Park neighboring states like Ngiual and Ngchesar for packaged tours and diversified attractions. By making strategic investments, Meleleok can capitalize on ecotourism and cultural tourism opportunities. • Bukl ra Techobei Hilltop Nature-based sites: • Ngardok Nature Reserve State Tourism Priorities to Be Recognized in the Palau Sustainable Tourism Strategy Built attractions: Î Sustainable destination management. Building capacity for the community in sustainable tourism • Capitol Building operations; implementing sustainable management practices in conservation areas; land use • Bailechesau Community Center planning for climate-resilient tourism. Future opportunities Î Infrastructure development. Investing in infrastructure and services that support the state’s plan for eco-friendly tourism development, including roads, visitor facilities, visitor information center, and • Btelulachang ra Such Park water and waste management. Sources: Melekeok State representatives (interviews, June 2024); Melekeok State Master Plan and Land Use Plan (2012); Melekeok State Master Plan 2023–2032 (Draft); Melekeok Climate Smart Resilient Development Guidance (2018); Ngardok Nature Reserve Sustainable Tourism Plan; Visitors Manual and Ecotourism Plan; and PVA data and printed/online information resources. 14 Palau Sustainable Tourism Strategy 2025–2028

3. State-Based Destination Analysis East Babeldaob Cluster (Ngchesar, Melekeok, Ngiual) Ngiual State Overview: Located on the east coast of Babeldaob, a 45-minute drive from Koror, Ngiual is in the early stages of tourism development. It is part of the Alii Pass Program and offers a tranquil escape with its natural beauty and rich cultural heritage. This includes eco-tourism experiences such as kayaking through the peaceful Ngemai Conservation Area and hiking to the scenic Orsoulkesol Waterfall. Ngirngemelas Square statue tells the story of the sunken village and the legendary warrior Ngirngemelas, adding cultural depth to the state’s offerings. Vision for tourism: “Providing positive experiences for visitors of Ngiual’s natural and cultural heritage.” (Ngiual State Sustainable Ecotourism Management Plan 2023–2029) Tourism management: Ngiual does not currently have a designated tourism office or officer. Tourism sites’ management is minimal, but there are plans to have a tourism department in the future.  State planning: The Ngiual State Master Plan 2023-2033 is still in draft. Its land use plan provides a criteria for areas for developments of resorts, but the sites need to be identified. Other plans include the Ngiual State Sustainable Ecotourism Management Plan 2023–2029 and the draft Mangrove Ecotourism in Ngiual State Implementation Plan 2023. Population: 312 (2015) Conservation areas: Ngiual has two conservation areas—Ngemai Conservation Area and Ngerbekuu Nature Reserve, both ecotourism sites. The Ngemai Conservation Area protects the mangrove Land mass: 17 km2 ecosystem, while the Ngerbekuu Nature Reserve is crucial for maintaining the freshwater ecosystem and includes the Orsoulkesol Waterfall. Current Destination Stage: Registered historic sites: Ngiual has seven registered historic sites. The Ngebedech Terraces, or ENTRY-STAGE Ouballang ra Ngebedech, is on the UNESCO World Heritage tentative list for cultural attributes. Accommodation supply: There is one accommodation provider, offering three rooms. Visitor Attractions Tour operators/guides: Ngiual has one tour operator. Marine attractions Assessment of tourism development prospects: Ngiual can benefit from collaborating with • Ngemai Bay Conservation neighboring state Melekeok to provide visitor experiences that serve hotel guests staying nearby Area (for kayaking) —specifically, products centered around balancing environmental conservation with economic • Ngibtal Sunken Village opportunities. To develop small-scale tourism in the short to medium term, it will need to strengthen (for snorkeling and diving) its tourism management body to oversee all tourism activities for the state. It will also need to invest in and maintain infrastructure, such as the Ngirngemelas Square and Imekang Dock, as well as new Terrestrial attractions facilities. Furthermore, it should foster community involvement, linking local industries such as agriculture and crafts with tourism, while building capacity through skills development and training. Historic/cultural sites: • Ngellau and Orengodel er a Bai • Ngirngemelas Tomb State Tourism Priorities to Be Recognized in the Palau Sustainable • Lukel a Tutau (Nest of the Tourism Strategy Morning Bird) Î Destination governance. Establishing a tourism management body to oversee operations, promote • Sualel a Iluochel (stone feature) sustainable practices, and enhance infrastructure at key attractions. Nature-based sites: Î Destination management. Implementing the Ngiual State Sustainable Ecotourism Management Plan • Orsoulkesol Waterfall 2023–2029 to guide development and conservation efforts. • Ngerbekuu Nature Reserve Î Skills and workforce development. Training and capacity building for the local tourism workforce. • Livestock/upland farming Î Community engagement. Engaging communities in tourism and linking local industries with tourism. Î Destination marketing. Strengthening marketing efforts to align with national tourism strategies. Built attractions: • Ngirngemelas Square • Imekang Dock Future opportunities • Community-based tourism experiences Sources: Ngiual State representatives (interview, June 2024); Ngiual State Master Plan 2023–2033 (Draft); Ngiual State Sustainable Ecotourism Management Plan 2023–2029; and PVA data and printed/online information resources. Palau Sustainable Tourism Strategy 2025–2028 15

3. State-Based Destination Analysis West Babeldaob Cluster (Aimeliik, Ngatpang, Ngeremlengui, Ngardmau) Aimeliik State Overview: Aimeliik attracts a growing number of tourists exploring the southwest of Babeldoab by road who are interested in seeing its land-based cultural and historical sites. Ngatpang, Ngeremlengui, and Ngardmau are at different levels of market readiness. Through the Alii Pass program, Aimeliik offers a compelling visitor experience showcasing its culture and history. Aimeliik is also developing additional attractions, such as water activities at Ngerchebal Island (e.g., snorkeling and diving) and an ecotour for the Ngerderar Conservation Area. Vision for tourism: “In 10 years, tourism revenues increase from land and marine activities operating under capacity caps that maintain environmental values, with the development of at least two additional sites.” (Aimeliik State Master Plan (Draft)) Tourism management: Aimeliik State has a tourism officer and a state visitors’ office.  State planning: The Aimeliik State Master Plan draft is being finalized. The Aimeliik State Tourism Plan, which includes the Ameliik System of Conservation Areas Ecotourism Management Plan, is being drafted. Conservation areas: Aimeliik has six conservation areas (terrestrial and marine)—Ngaremeduu Conservation Area (shared with Ngatpang and Ngeremlengui states), Ngerchebal Island, Badelchedib Conservation Area, Imul Mangrove Conservation Area, Aimeliik Marine Reef Sanctuary (PAN site), Population: 363 (2020) and Ngerderar Watershed (PAN site). The Ngerderar Watershed is the only terrestrial conservation Land mass: 38.7 km2 area in the state. The Ngaremeduu Conservation Area, a UNESCO Biosphere Reserve, is currently the focus of a sustainable tourism planning initiative supported by the US National Park Service. Current Destination Stage: Registered historic sites: Aimeliik has 15 registered historic sites, which include stone features, ENTRY-STAGE traditional villages, terraces, and sacred sites. Accommodation supply: None at this time. Visitor Attractions Tour operators/guides: None at this time. Assessment of tourism development prospects: Tourism is a priority sector in Aimeliik, with budget Terrestrial attractions allocations in place for its development. Existing attractions, such as the Ngerderar trail, would Historic/cultural sites: benefit from enhancements that improve their market readiness. There are also opportunities to develop visitor experiences, such as water activities at Ngerchebal. The absence of a state tourism • Bai Rekeai (traditional men’s plan has been a barrier to development; however, a tourism officer is currently leading the effort to meeting house) draft a state tourism plan. This will position Aimeliik well for the sustainable development of small- • Malsol’s Tomb scale tourism in the medium term. The plan will identify the specific needs of each site and inform • Ouballang er Ngermeliik (terrace) the following steps to develop them into market-ready products. Collaboration with other member • Stone feature—story of states of Dmakeiukl will support a clustered approach to tourism development whereby states can Ngerbungs work together to share tourism resources and benefits and sustainably manage visitor flows as • Remiang er a Medorm numbers grow. (sacred tree) • Elderrir a Ruchub (stone feature) State Tourism Priorities to Be Recognized in the Palau Sustainable Nature-based sites: Tourism Strategy • Ngerderar Watershed Trail • Continental feature (natural Î Destination planning. Conducting a destination audit to assess market readiness and identify priorities for tourism infrastructure and services; developing a state tourism plan. water pools) Î Skills development for tourism. Building capacity for a skilled tourism workforce. Built attractions: Î Visitor experience and product development. Developing new cultural tours and experiences • Kamosang Dock at sites with identified potential. • Ngerderar Market Future opportunities • Ngerchebal Island • Palau golf course • Bai er a Lmuut, Bairebech • Ngoterbekang traditional square pool • Ngaremeduu Conservation Area Sources: Aimeliik State representatives (interview); Aimeliik State Master Plan (Draft); Ameliik System of Conservation Areas (ASCA) Ecotourism Management Plan; and PVA data and printed/online information resources. 16 Palau Sustainable Tourism Strategy 2025–2028

3. State-Based Destination Analysis West Babeldaob Cluster (Aimeliik, Ngatpang, Ngeremlengui, Ngardmau) Ngatpang State Overview: Ngatpang State in central Babeldaob offers a blend of cultural and natural attractions, including the Tabecheding Waterfall and the Ngerdubech Trail. Kokusai Park, a hub for cultural events, community gatherings, and visitor engagement, also plays a pivotal role in the state’s cultural and tourism landscape. Several attractions are open to visitors, but many sites are still being planned or developed and have limited visitor facilities. The state has about 20 to 30 visitors annually. Vision for tourism: “In 10 years, Ngatpang is making use of our assets (cultural, historical, and natural sites) to substantially increase revenue from tourism through ecotourism in multiple sites (including new ones like community parks), prioritizing local labor, and supporting the development of homestays, bungalows, and restaurants, so that sites are preserved and help the future generation to know more about their history and culture.” (Ngatpang State Master Plan 2024–2029 (Draft)) Tourism management: Ngatpang does not currently have a tourism office.  State planning: The Ngatpang Protected Areas Network Plan (2024) and the Ngatpang Historical and Cultural Preservation Plan are in place. The draft Ngatpang State Master Plan 2024–2029 is expected to be enacted by the end of 2024. Ngatpang also has plans for conservation areas (see below). Population: 289 (2015) Conservation areas: Ngatpang has four conservation areas—Oruaol Ibuchel Conservation Area, Iuul Conservation Area, Olterukl Conservation Area, and Ngaremeduu Conservation Area (shared Land mass: 40 km2 with Ngeremlengui and Aimeliik states). The Ngaremeduu Conservation Area, a UNESCO Biosphere Reserve, is currently the focus of a sustainable tourism planning initiative supported by the US Current Destination Stage: National Park Service. ENTRY-STAGE Registered historic sites: The 14 registered historic sites include cultural and historical features, such as stone features, WWII remains, and traditional villages. Visitor Attractions Accommodation supply: None at this time. Tour operators/guides: Ngatpang has one licensed tour operator. Terrestrial attractions Historic/cultural sites: Assessment of tourism development prospects: Ngatpang is strengthening its foundations for • Ngerdubech Trail tourism by investing in large-scale projects, such as improvements to Kamesang Dock and road paving, and smaller initiatives, such as enhancing the Sidang Sireib Loop Trail and improving • Sidang Sireib and Wakui access to key attractions. These efforts, together with the state’s natural and cultural assets, and (historic remains) its commitment to prioritize sustainable growth through environmental and cultural preservation, • Beluu er a Ngimis position Ngatpang as an emerging ecotourism destination. This can be realized in the short to (traditional village) medium term with more investments in supporting small-scale infrastructure at sites and the • Ngerebadelmangel development of a state tourism management plan. Collaborating with neighboring states of the (stone feature) West Babeldaob Dmakeiukl cluster will support this. • Ngersois (bathing pool) Nature-based sites: • Tabecheding Waterfall State Tourism Priorities to Be Recognized in the Palau Sustainable Tourism Strategy Built attractions: • Kokusai Park Î Visitor experience and product development. Enhancing the Ngerdubech Trail and other cultural sites; establishing a cultural center to promote Palauan traditions and ecotourism. Future opportunities Î Sustainable destination management. Strengthening conservation efforts through the PAN • Kamosang Dock as a base and local engagement. for ecotourism experiences, Î Infrastructure development. Investing in infrastructure such as a visitor center and site fishing farm attraction, and sea enhancements to support ecotourism and expand local businesses. cucumber rejuvenation • Telikeu (for agri-tourism) • Traditional villages • Stone platforms • Historic remains • Palaun cultural center Sources: Ngatpang State representatives (interview, May 2024); Ngatpang State Master Plan 2024–2029 (Draft); Ngatpang Historical and Cultural Preservation Plan; Ngatpang PAN Plan; and PVA data and printed/online information resources. Palau Sustainable Tourism Strategy 2025–2028 17

3. State-Based Destination Analysis West Babeldaob Cluster (Aimeliik, Ngatpang, Ngeremlengui, Ngardmau) Ngeremlengui Overview: Ngeremlengui, in the west-central part of Babeldaob, is the largest state in Palau by land area. While its economy relies heavily on subsistence agriculture and fishing, the state is gradually opening up to tourism. It has some attractions: Beluu er a Ngerutechei (a traditional village) and Ngermeskang Bird Sanctuary, a Protected Area Network (PAN) site. On the nearshore reef are marine protected areas that are ideal snorkel sites while it is the only state on the west Babeldaob (and Melekeok on the East) which has seasonal upwelling waves for the surfing enthusiast. However, the lack of infrastructure and limited market readiness means it does not attract many visitors outside of locals and visiting friends of locals from the region. Vision for tourism: “Strengthen partnerships to use historical sites in Imeong, Ngerutechei, Ngeremetengel, Ngchemsed, and Ngereklengong hamlets as tourist sites are in place and in 10+ years, these sites are restored and created for use as a tourism sites and cultural learning centers.” (Ngeremlengui State Master Plan (2025)) Tourism management: Ngeremlengui does not have a dedicated tourism office or officer.  State planning: The Ngeremlengui State Development Master Plan is inclusive of a land use plan and zoning. Ngeremlengui also has plans for conservations areas (see below). Conservation areas: Ngeremlengui has three major conservation areas—Ngaremeduu Conservation Population: 349 (2020) Area (shared with Ngatpang and Aimeliik states), Ngermeskang Bird Sanctuary, and Ngeremeskang Land mass: 68 km2 Conservation Area. The Ngaremeduu Conservation Area, a UNESCO Biosphere Reserve, is currently the focus of a sustainable tourism planning initiative supported by the US National Park Service. The Current Destination Stage: Ngermeskang Bird Sanctuary Management Plan 2024–2028 guides the management of this PAN site established in 2013. There are marine protected areas as well. YET-TO-ENGAGE Registered historic sites: Ngeremlengui has 16 registered historic sites, which include stone features, traditional villages, caves, and WWII remains. Visitor Attractions Accommodation supply: None at this time. Terrestrial attractions Tour operators/guides: State rangers provide guided tours at Ngeremeskang Bird Sanctuary upon request. Historic site tours can be arranged through the State Office. Local boats can be hired for Historic/cultural sites: snorkeling and fishing. • Beluu er a Ngerutechei (traditional village) Assessment of tourism development prospects: Ngeremlengui has extensive natural and cultural assets with prospects for small-scale sustainable tourism. The state supports aquaculture with Nature-based sites: 25 giant clam farms, has revitalized collective farming with upland taro and tapioca gardens, and • Ngermeskang Bird Sanctuary developed MSMEs through tourism initiatives. To grow as an ecotourism destination—linked to neighboring Dmakeiukl states in the west Babeldaob cluster—Ngeremlengui must strengthen Built attractions: tourism-enabling beginning with increasing human resource residency and capacity as well as • Palau Community College building necessary infrastructure and visitor facilities. With careful management and investment, the state has the potential to attract visitors seeking eco-friendly and culturally immersive • Hatchery experiences while preserving its environment and traditions. Future opportunities • Ngeruach Mountain State Tourism Priorities to Be Recognized in the Palau Sustainable • Chetireuir Mountain Tourism Strategy Î Destination planning. Improving tourism readiness with sustainability by preparing a tourism plan. Î Destination management governance. Improving tourism readiness by establishing a tourism office. Î Visitor experience and product development. Improving and promoting existing sites; recording state-specific cultural and traditional stories and practices as intangible cultural assets. Î Skills development for tourism. Introducing tour guide training and capacity building programs, incorporating the above cultural knowledge. Î MSME development. Supporting the growth of tourism-related businesses (accommodation and specialty services). Sources: Ngeremlengui State representatives (interview, June 2024); Ngeremlengui State Master Plan (Draft); Ngermeskang Bird Sanctuary Management Plan 2024–2028; and PVA data and printed/online information resources. 18 Palau Sustainable Tourism Strategy 2025–2028

3. State-Based Destination Analysis West Babeldaob Cluster (Aimeliik, Ngatpang, Ngeremlengui, Ngardmau) Ngardmau State Overview: Ngardmau is home to one of Palau’s most visited attractions—the Ngardmau (or Medal a lechad) waterfall, which is the highest in Palau. Since first attracting visitors in the 1980s, the state has developed the site to include better walkways, a customer service office, a parking lot, and regular maintenance. It currently attracts around 20,000 visitors each year. In recent years, the state has identified additional attractions such as the Japanese Jinja Shrine and bauxite mining sites. As an emerging destination, Ngardmau provides a few market-ready attractions and experiences for visitors, but it is currently working on more experiences. Vision for tourism: “To develop a locally-grown ecotourism industry, focused on sustainability and preserving cultural heritage. The vision includes strengthening community participation and ownership in the tourism sector to ensure intergenerational benefits.” (Ngardmau State Sustainable Ecotourism Management Plan 2023–2029 (Draft)) Tourism management: Ngardmau State has an established tourism management system led by the state’s Department of Tourism. The department is responsible for marketing tours, collecting fees, training and certifying tour guides and operators, and ensuring compliance with tourism regulations.  State planning: Ngardmau is guided by the Ngardmau State Master Plan 2023–2028, which was Population: 238 (2020) enacted in April 2024. The state is currently drafting its Sustainable Ecotourism Management Plan 2023–2029, which aims to address priority developments on identified tourism sites. Land mass: 30 km2 Current Destination Stage: Conservation areas: Ngardmau has four conservation areas—Ngermasech Marine Conservation Area, Ileakl beluu Marine Conservation Area, Ngerchelchuus Conservation Area, and the “Taki” Conservation Area for the Ngardmau (or Medal a lechad) Waterfall. EMERGING Registered historic sites: The state has 15 registered historic sites, which include WWII Japanese remains, traditional villages, water wells, caves, and terraces. Visitor Attractions Accommodation supply: None at this time. Marine attractions Tour operators/guides: There are two registered tour operators. • Ileakl beluu Marine Conservation Area (for diving) Assessment of tourism development prospects: Ngardmau State has the potential to grow tourism by focusing on (i) developing well-managed tourism packages such as the mesei and bong taro Terrestrial attractions field tour and the Japanese bauxite mining tour, (ii) introducing new experiences such as kayak tours and war relics tour, (iii) improving infrastructure such as roads and visitor facilities, and (iv) Historic/cultural sites: building a skilled local workforce through training programs. Collaboration with member states of • Japanese Jinja Shrine the Dmakeiukl cluster of West Babeldaob states could be valuable for managing higher numbers of • Urdmang and Beluu er a visitors, allowing members to share resources and coordinate tourist flows with neighboring states. Ngerutoi (traditional villages) Nature-based sites: State Tourism Priorities to Be Recognized in the Palau Sustainable • Medal a lechad and Ongimii Tourism Strategy (waterfalls) • Chemutii Wildland Î Destination management. Implementing the Ngardmau State Sustainable Ecotourism Management Plan 2023–2029. Built attractions: Î Visitor experience and product development. Enhancing existing sites and introducing new • Bdelulachang State Park experiences. • Mt. Ngerhelchuus Park Î Infrastructure development. Improving roads, visitor facilities, and access to key sites. Future opportunities Î Skills and workforce development. Investing in training and certification programs for the local workforce. • Tours of historic Japanese bauxite mining site • Mesei and bong taro field tour • Coastal kayak tours • War relics tour Sources: Ngardmau State representatives (interviews, September 2024); Ngardmau State Master Plan 2023–2028; Ngardmau State Sustainable Ecotourism Management Plan 2023–2029 (Draft); and PVA data and printed/online information resources. Palau Sustainable Tourism Strategy 2025–2028 19

3. State-Based Destination Analysis Far North Coast and Islands Cluster (Ngaraard, Ngarchelong, Kayangel) Ngaraard State Overview: Ngaraard is about a 30-minute drive north of Palau International Airport. It offers several tourism sites, including both land and marine attractions. Since joining the Alii Pass program in 2022, Ngaraard has worked with agencies such as the Sasakawa Peace Foundation for capacity-building training and tour packages. The state promotes its tour theme “Discover Ngaraard, Trails of Legends and Lore,” which invites visitors to experience landmarks such as the Ngerchokl Fountain of Youth and the Olebakelderau (Love Story of Tulei and Surech) petroglyph, among other attractions. This has contributed to the increasing number of visitors, currently around 30 to 40 people per month. Vision for tourism: “We the people of Ngaraard want to enjoy our marine and terrestrial resources for a long period of time to come while we also want to generate income through eco-friendly tourism for people to see and appreciate our heritage.” (As shared during stakeholder consultations in 2024). Tourism management: The state recently established a tourism office with a Chief of the Division of Community, Cultural and Tourism under the Office of the Governor.  State planning: The Ngaraard State Master Plan (June 2023) is being reviewed by the legislature for approval. It includes land use plans with identified zones for resorts and visitor activity. Ngaraard also has plans for conservation areas (see below). Conservation areas: Ngaraard has seven conservation areas—Ongiil Conservation Area, Ngerkall Lake Population: 396 (2020) Conservation Area, Metmellasech Watershed Conservation Area, Diong ra Ngerchokl Conservation Land mass: 28 km2 Area, Ungellel Conservation Area, West Coast Conservation Area, and East Coast Conservation Area. The state’s Kerradel Conservation Network Management Plan (2018–2023) focuses on managing Current Destination Stage: these PAN sites. EMERGING Registered historic sites: Ngaraard has 13 registered historic sites, which include various stone features and traditional villages, a petroglyph, traditional bathing pools, the landmark Tangelbad, and an underwater fortress. Visitor Attractions Accommodation supply: Five accommodations operate in the state, totaling 14 rooms. Tour operators/guides: None at this time. Marine attractions • Brert Mangrove Tour Assessment of tourism development prospects: Ngaraard State offers exciting opportunities for (traditional raft tour) sustainable tourism growth, with its rich natural and cultural heritage ready to be explored. However, several areas need attention for development. The first steps include establishing a tourism office, Terrestrial attractions securing a budget, and improving tourism planning. Personnel also need to be recruited to maintain Historic/cultural sites: all sites, especially non-conservation areas, as only conservation sites are currently covered. There is also a need to enhance transport infrastructure and accommodations to improve visitor accessibility • Ngerchokl Fountain of Youth and experience. Additionally, more robust community engagement and the development of more • Olebakelderau—Love Story of market-ready products are essential. While existing facilities are sufficient for visitors, partnering Tulei and Surech (petroglyph) with neighboring states can help optimize resources and ensure tourism growth while minimizing • Prince Takamatsu Monument environmental and cultural impacts. • Ngaraard mesei tours and demok demo (agri-tours) State Tourism Priorities to Be Recognized in the Palau Sustainable • Bai er a Ngaruau (traditional village) Tourism Strategy • Burial of Surech’s Head Î Destination management governance. Establishing a tourism department with a dedicated • Kuabes State Park budget to coordinate and implement the state’s tourism operations. • Beriber (ancient structure) Î Infrastructure development. Improving resting areas and visitor facilities to support the growing number of tourists. • Monument of Maderangebuked Î Skills development. Building local workforce capacity for site management and tourism Built attractions: department operations. • Coral regeneration activity Î Community engagement. Involving local communities and linking tourism with local industries for sustainable benefits. Sources: Ngaraard State representatives (interview, September 2024); Ngaraard State Master Plan, June 2023 (Draft); Kerradel Conservation Network Management Plan (2018–2023); and PVA data and printed/online information resources. 20 Palau Sustainable Tourism Strategy 2025–2028

3. State-Based Destination Analysis Far North Coast and Islands Cluster (Ngaraard, Ngarchelong, Kayangel) Ngarchelong Overview: Ngarchelong, located at the northern tip of Babeldaob, about 50 miles from Palau International Airport, is an emerging destination that aims to harmonize tourism growth with conservation. The state plans to enhance infrastructure that supports tourism while preserving its natural and cultural heritage. The state’s three main attractions (Todai Lighthouse, Badrulchau stone monoliths, and Ebiil Conservation Area) are partially market-ready, with basic visitor facilities, consistent operating hours, and an entry fee of USD5 per site. Vision for tourism: “In the next decade, Ngarchelong envisions a sustainably developed tourism industry that harmonizes growth with conservation, welcoming more visitors while protecting the state’s cultural and environmental integrity.” (Ngarchelong State Master Plan 2024–2034) Tourism management: Ngarchelong is working to establish a dedicated tourism office with an officer within the next four years.  State planning: The Ngarchelong State Master Plan 2024–2034 highlights the state’s commitment to enhancing tourism infrastructure and promoting cultural and natural tourism experiences. Key focus areas include finalizing a comprehensive tourism plan, upgrading access and facilities at crucial heritage and conservation sites, and expanding tour services. Close collaboration with partnering Population: 384 (2015) agencies focused on nature conservation, preserving cultural heritage, and supporting rural communities ensures a focus on sustainable tourism development. Land mass: 10 km2 Current Destination Stage: Conservation areas: Ngarchelong has four conservation areas—Ebiil Conservation Area, Ermang Mangrove Area, Ngarkeklau Island, and Northern Reefs (Ngerael) for catch and release activities. EMERGING Registered historic sites: Ngarchelong has 16 registered historic sites. These include traditional sites such as fortresses and stone features, historical sites such as the WWII Japanese Lighthouse remains and terraces, and other cultural sites. The Tet el Bad stone coffin is on the UNESCO World Heritage Visitor Attractions tentative list for cultural attributes. Accommodation supply: None at this time, but there are plans to encourage the development of Marine attractions small low-impact accommodations that reflect the standards of eco-based tourism. • Ebiil Conservation Area (for educational tours) Tour operators/guides: Ngarchelong has one tour agency on-site and other freelance guides for private tours. Terrestrial attractions Historic/cultural sites: Assessment of tourism development prospects: Ngarchelong is positioned to progress small-scale tourism development in the short to medium term, with ongoing projects to enhance dock facilities, • Toluk el Bad, Tet el Bad, and water supply, and visitor amenities setting the stage for growth. Plans to develop accommodations Kukau el Bad (stone features) and formal tour services to capitalize on culture and nature-based assets (marine and terrestrial) • Euatel er a Ngerbau (fortress) can be achieved in the medium to long term. Central to this vision is the plan to develop community- • Todai (Japanese lighthouse) centered tourism that engage the community closely for full ownership and management of products and services. Achieving this vision will require education and training, securing investments, fostering • Badrulchau (stone monoliths) community and governmental support, and upgrading visitor-friendly infrastructures. By integrating • Diong er a Teluat and Diong er a these efforts with neighboring states such as Ngaraard and Kayangel, Ngarchelong can build a Oteloi (traditional bathing pools) competitive sustainable tourism offering. • Ngerkeklau Island • Ngerbau Boardwalk State Tourism Priorities to Be Recognized in the Palau Sustainable Built attractions: Tourism Strategy • Two popular restaurants Î Destination planning. Developing a comprehensive tourism management plan. Future opportunities Î Infrastructure development. Developing accommodation, infrastructure, and accessibility at key sites. • Accommodation development Î Skills and workforce development. Establishing a tour guide certification program. and guided terrestrial tours Î Sustainable destination management. Promoting sustainable tourism practices in collaboration • Visitor experiences at with various national government incentives and initiatives. traditional villages (Ngermetong and Ngeiungel) Sources: Ngarchelong State representatives (interview, May 2024); Ngarchelong State Master Plan 2024–2034 and Appendix; and PVA data and printed/online information resources. Palau Sustainable Tourism Strategy 2025–2028 21

3. State-Based Destination Analysis Far North Coast and Islands Cluster (Ngaraard, Ngarchelong, Kayangel) Kayangel State Overview: This picturesque atoll’s four islands, pristine lagoon, sandy beaches, and coconut palms attract a handful of visitors annually. Located 25 miles north of Babeldaob, access to Kayangel can be challenging, and boat trips must be arranged in advance. The main attractions are diving, snorkeling, and catch and release fishing in Ngeruangel Marine Reserve, along with visits to the Ngeriungs Bird Sanctuary and cultural sites like traditional meeting houses and bathing areas. While not considered “market-ready,” the state aims to grow its tourism offerings sustainably. Vision for tourism: “In 10 years, Kayangel’s tourism industry has doubled to include more sites, more visitors, and more people working in the industry, leading to more income for the State and families, while minimizing negative consequences.” (Kayangel State Master Plan 2024–2034 (Draft)) Tourism management: Kayangel does not currently have a state tourism office or officer; however, it intends to establish a tourism office within four years.  State planning: The draft Kayangel State Master Plan 2024–2034 will be finalized in 2024. It identifies tourism priorities, including an intention to prepare a tourism plan within two years. The Kayangel PAN Management Plan 2020–2025 also serves its six PAN sites. Conservation areas: Kayangel has five conservation areas—Ngeruangel Marine Reserve, Ngkesol Barrier Reef, Chermall Forest Preserve, Ngeriungs Bird Sanctuary, and Ngerusebek Forest Preserve, Population: 41 (2015) which are all PAN sites. Land mass: 1.78 km2 Registered historic sites: Kayangel has nine registered historic sites, including traditional bathing Current Destination Stage: pools that are unique to the state and have high tourism potential. Accommodation supply: One property (with two rooms) is currently licensed, while two other ENTRY-STAGE accommodations are available. The state plans to increase accommodation supply within eight years. Two sites have been identified for development. Visitor Attractions Tour operators/guides: The state has no licensed guides, but a transfer service is available to visitors. Assessment of tourism development prospects: Kayangel has the potential, in the medium term, Marine attractions to attract a growing but small number of tourists wanting to explore beyond Koror and Babeldaob. • Ngeruangel Marine Reserve (for This requires planning, investment in access and enabling infrastructure, and training to develop diving, snorkeling, and catch and the state’s marine and terrestrial assets into market-ready, sustainable tourism products. However, release fishing) such development will need to remain small-scale due to the state’s remoteness, size, environmental fragility, small population, and infrastructure constraints. Small-scale development will also help Terrestrial attractions maintain the state’s “untouched” appeal. Historic/cultural sites: • Meduu el Bai, Bai er a State Tourism Priorities to Be Recognized in the Palau Sustainable Ngerurou, and Bai er a Ngerbesang (traditional Tourism Strategy meeting houses/stone platforms) Î Destination planning. Improving tourism readiness by preparing a tourism plan, establishing • Diong er a Olekang, Diong er a tourism office, and introducing tour guide training and capacity building programs. a Dokou, Diong er a Orukei, Î Visitor experience and product development. Developing tourism products (medium term); and Diong er a Chermang increasing accommodation supply (longer term). (traditional bathing areas) Î Infrastructure development. Strengthening local infrastructure and services (water quality, Nature-based sites: waste management) and fostering produce linkages with tourism. • Ngeriungs Bird Sanctuary Î Sustainable destination management. Maintaining cultural sites, managing terrestrial resources, • Ngkesol Conservation Area and developing produce linkages with tourism. (for diving and fishing) • Sori Beach Future opportunities • Boutique accommodation development with seaplane access Sources: Kayangel State representatives (interview, May 2024); Kayangel State Master Plan 2024–2034 (Draft); Kayangel State user fees; Kayangel boat fare rate; and PVA data and printed/online information resources. 22 Palau Sustainable Tourism Strategy 2025–2028

3. State-Based Destination Analysis Near South Islands Cluster (Peleliu, Angaur) Peleliu State Overview: Peleliu has a rich World War II history that appeals to a niche travel segment. Notable sites include the famous Bloody Nose Ridge, the WWII Museum (currently under renovation), and several Japanese memorials and bunkers. Peleliu also boasts marine activities and natural attractions. The Lkes Bird Sanctuary and the proposed conservation area, Forest of Hope, enhance the state’s ecotourism potential. Peleliu attracts around 50 tourists per month during the low season and up to 300 tourists per month in the high season. Its small airport is serviced by Smile Air Inc. and Pacific Mission Aviation through chartered flights, and boat services operate from Koror four times a week. One-day tours are also available from tour companies based in Koror, which is a 1.5-hour boat ride away. While many of its attractions are not fully developed, Peleliu is actively working toward improving its tourism offerings through infrastructure improvements, conservation efforts, and sustainable tourism management. Vision for tourism: “Eco-friendly tourism that is sustainable, smarter through innovation and digital transformation, promoting local Peleliu businesses and entrepreneurship, create more jobs for locals and better training.” Tourism management: Peleliu has a tourism office with 20 employees (a mix of state office employees and state rangers) managing state attractions and visitor experiences. Plans are being Population: 470 (2015) made to establish a dedicated tourism department to improve the coordination of tourism activities and infrastructure management. Land mass: 19 km2 Current Destination Stage:  State planning: The Peleliu State Master Plan is in draft, and the land use plan has yet to be completed. Conservation areas: Peleliu has one conservation area—Teluleu Conservation Area. EXPANDING Registered historic sites: The state has six registered historic sites, which include traditional villages, the Ii er a Irur cave, the Taoch er a Ngebungel dock, the Peleliu Shell Midden, and the famous Peleliu Visitor Attractions Battlefield landmark. Accommodation supply: There are 10 operating accommodations, totaling 64 rooms. There are a few Marine attractions sites with reported potential for future accommodation projects. • Orange Beach, White Beach, Scarlet Beach, and Honeymoon Tour operators/guides: Peleliu has two licensed tour operators. Beach • Ngermelt Swimming Hole Assessment of tourism development prospects: Peleliu has strong potential as a historical and ecotourism destination. In the short term, this requires (i) investing in small-scale infrastructure Terrestrial attractions at key visitor sites (e.g., renewing old floating docks, adding bathroom facilities), (ii) training local guides to lead tours, with foreign guides as translators, (iii) establishing a tourism department Historic/cultural sites: to enhance these efforts, (iv) preserving historic sites (e.g., the WWII Museum with professional • Peleliu Battlefield landmark expertise), (v) improving signage, (vi) improving online marketing (via a state website), (vii) improving • 1,000 Man Cave communication with private companies to manage walk-in and reserved tours, and (viii) training programs in customer service and tourism operations. This will help professionalize the industry and • Bloody Nose Ridge ensure the supply is market-ready. Furthermore, planned improvements to the airstrip will support • WWII remains the future prospects for tourism. Nature-based sites: • Lekes Bird Sanctuary State Tourism Priorities to Be Recognized in the Palau Sustainable • Forest of Hope Tourism Strategy Built attractions: Î Destination management governance. Establishing a tourism department and improving • Monuments communication with private companies to streamline tour coordination. • Peleliu Peace Memorial Park Î Visitor experience and product development. Enhancing visitor facilities with bathrooms and better • Peleliu World War II Museum signages at sites. Î Destination marketing. Creating a state website. Future opportunities Î Skills development and community engagement. Providing training for locals in tour guiding, as well • Various cultural, historic, and as training for customer service and tourism business management to professionalize the industry nature-based visitor experiences and encourage local involvement. Sources: Peleliu State representatives (interviews, September 2024); and PVA data and printed/online information resources. Palau Sustainable Tourism Strategy 2025–2028 23

3. State-Based Destination Analysis Near South Islands Cluster (Peleliu, Angaur) Angaur State Overview: Angaur State, known as the birthplace of the legendary giant Uab, holds a special place in Palauan tradition as the origin of Palau itself, where Uab’s fall gave birth to the islands. Lukes, a marine visitor attraction for diving, is the place where Latmikaik gave birth to Uab. Today, Angaur offers seclusion and tranquility, attracting a small number of long-stay visitors seeking a peaceful environment for reflection and creativity (e.g., writers). Angaur has long protected its environment and local way of life, safeguarding coral species and managing resources independently from the PAN. Angaur is accessible via a two-hour boat ride from Koror and a 30-minute boat ride from Peleliu, but scheduled services are unreliable, making access a barrier to tourism. However, visitors can arrange their own transport. With minimal tourism infrastructure and a focus on preserving its natural and cultural heritage, Angaur is gradually developing a niche for low-impact tourism, balancing visitor experiences with the protection of its unique environment and local way of life. Vision for tourism: Tourism will be the cornerstone of Angaur’s economic development, where the community supports long-term stays for professionals seeking seclusion to focus on projects like writing or research. Visitors will be drawn to the peaceful, nature-filled environment, perfect for wellness activities such as swimming, biking, and jogging in serene solitude, and the state has been marketed as a long-stay destination. Tourism management: None due to limited funding. Population: 141 (2020)  State planning: The Angaur State Master Plan has been finalized. Land mass: 8 km2 Conservation areas: Angaur has one conservation area—Angaur Permanent Conservation Area. Current Destination Stage: Registered historic sites: The state has eight registered historic sites, which include traditional ENTRY-STAGE villages, historic remains, and stone platforms. Accommodation supply: A few homestays and camping are available. There is interest in expanding this. Visitor Attractions Tour operators/guides: These are available upon request through the state office. Marine attractions Assessment of tourism development prospects: The state aims to attract more long-term visitors, • Kerker and Lukes sites (for such as those seeking seclusion for activities like research or writing. To achieve this, it plans to guided diving and snorkeling) expand niche accommodation, such as private home rentals, bungalows, tiny homes, and luxury tents. However, this may be limited by access and other infrastructure in the short to medium term. Terrestrial attractions Pursuing low-impact tourism while preserving the environment and culture will require finalizing Historic/cultural sites: the state’s tourism master plan, which will define the steps to achieve this vision. This plan should include training in hospitality and sustainable practices for the local community, as well as securing • Home of Uab (giant) partnerships to fund accommodation development. Enhanced marketing efforts and local capacity • Melech WWII monument building will further support the state’s growth as a unique long-stay destination. • Olsechall er a Ruchel (stone platform; restricted area) • Diong ra Ngedloch (bathing pool) State Tourism Priorities to Be Recognized in the Palau Sustainable • Phosphate drying plant Tourism Strategy (Blailebakl) Î Destination planning. Conducting a destination audit to assess market readiness and identify • Locomotive (German first car) priorities for tourism infrastructure and services; developing a state tourism plan. • Olekull cemetery Î Skills and workforce development. Building capacity for a skilled tourism workforce. • German grave Î Visitor experience and product development. Developing accommodations focused on long-stay services. Built attractions: • Shrine of Santa Maria Future opportunities • Wellness center • Bike competitions • Camping and other niche accommodation Sources: Angaur State representatives (interview, August 2024); and PVA data and printed/online information resources. 24 Palau Sustainable Tourism Strategy 2025–2028

3. State-Based Destination Analysis Far South Islands Cluster (Sonsorol, Hatohobei) Sonsorol State Overview: Sonsorol’s isolation has preserved the four islands’ natural beauty and rich cultural heritage. The state’s collaboration with liveaboards brings in a small number of visitors who contribute to tourism revenues. Apart from dive liveaboard visitors, the Ryoma Liveaboard offers tourists the chance to visit on one of four trips per year; however, the trip takes five days and is expensive. The infrequent transportation and a lack of infrastructure like accommodations and tourist facilities limit broader tourism growth. Additionally, the absence of formal tourism management keeps Sonsorol’s tourism sector in its infancy. Vision for tourism: “Within 10 years, Sonsorol State is capitalizing on existing tourism to a greater extent, has a detailed Tourism Plan in place, is building a foundation for future tourism, and an increasing number of community members promote Sonsorol’s islands and cultures by showcasing and selling their local and unique products and crafts to tourists and local consumers.” (Sonsorol State Master Plan 2024–2034 (Draft)) Tourism management: Sonsorol currently has no tourism officers.  State planning: The Sonsorol Master Plan 2024-2034 is still in draft. The plan emphasizes sustainable development, cultural preservation, and local industry enhancement. Zoning regulations to protect Population: 53 (2015) natural resources are also in draft. Land mass: 3 km2 Conservation areas: Sonsorol has one conservation area—Merir Conservation Area. Current Destination Stage: Registered historic sites: The state has three registered historic sites—Ringal (a traditional village), a Japanese defensive complex, and a Japanese defense fortification. ENTRY-STAGE Accommodation supply: None at this time. Visitor Attractions Tour operators/guides: None at this time. Assessment of tourism development prospects: Sonsorol’s remote location and limited Marine attractions infrastructure are not conducive to large-scale tourism development currently. However, this also • Sonsorol Reef (for diving) ensures that the islands remain an untouched paradise with opportunities for small-scale niche • Pulo Anna (diving spot) tourism. Sonsorol has the potential to position itself as a unique destination for ecotourism and cultural tourism, which will require strategic investments in infrastructure, human capacity building, Terrestrial attractions and sustainable practices. It will also need to be supported by better collaboration with the private sector (liveaboards) and stronger ties with the national government. Historic/cultural sites: • Faremau (traditional community hut) State Tourism Priorities to Be Recognized in the Palau Sustainable • Japanese World War II remains Tourism Strategy Nature-based sites: Î Destination planning. Developing a tourism plan that aligns with cultural and environmental goals. • Fanna Island Î Skills and workforce development. Building local capacity to manage and sustain tourism operations. Future opportunities Î Infrastructure development. Implementing small-scale infrastructure projects that support sustainable tourism, such as eco-friendly accommodations and transportation solutions. • Servicing liveaboards Î Destination marketing. Promoting Sonsorol’s cultural and natural heritage as key attractions for niche tourism markets. Sources: Sonsorol State Master Plan 2024–2034 (Draft); Sonsorol State representatives (interviews, August 2024); Sonsorol Zoning Regulations 2024 (Draft); and PVA data and printed/online information resources. Palau Sustainable Tourism Strategy 2025–2028 25

3. State-Based Destination Analysis Far South Islands Cluster (Sonsorol, Hatohobei) Hatohobei State Overview: Hatohobei, the most remote state in Palau, is known for its primary tourism asset—the Helen Reef. This biodiverse haven for scuba divers has over 530 species of reef fish, 282 species of hard coral, and endangered sea turtles and seabirds. Although its remoteness, limited infrastructure, and small population restrict tourism, Helen Reef attracts a few dive boats annually. The state aims to offer more land-based activities to enhance visitor experiences by developing small-scale tourism products. Vision for tourism: “In 10 years, Hatohobei offers new tourism products and local residents will be employed in the tourism industry.” (Hatohobei State Master Plan FY2024–2034 (Draft)) Tourism management: Hatohobei currently does not have a tourism office or officer.  State planning: The Hatohobei State Master Plan FY2024–2034 is in draft. The plan identifies areas for resort and facilities. A PAN Helen Reef Management Plan 2011–2016 continues to guide the protection of the area. Conservation areas: Hatohobei has one conservation area—Helen Reef Conservation Area, which is a PAN site. Registered historic sites: Hatohobei has five registered historic sites, consisting of two cultural and Population: 39 (2020) three historical sites. This includes WWII remains, a traditional burial site, and a traditional canoe house. Land mass: 0.63 km2 Accommodation supply: None at this time. Current Destination Stage: Tour operators/guides: None at this time, but the state intends to have one in the near future. ENTRY-STAGE Assessment of tourism development prospects: While Hatohobei is not positioned for large-scale tourism development due to its remoteness, limited infrastructure, and small population, the state can generate some tourism income in the short term by developing market-ready sites for dive Visitor Attractions liveaboard visitors. This will require investment in amenities at noted sites and the development of guided tours by the local community. Prospects for modest tourism development in the medium Marine attractions to longer term will require improving destination development readiness through improving • Helen Reef (for diving) transportation, building local capacity, and establishing a tourism management structure. Terrestrial attractions Historic/cultural sites: State Tourism Priorities to Be Recognized in the Palau Sustainable • Iporu (traditional village) Tourism Strategy • Matahong (WWII Japanese Î Destination management governance. Appointing a tourism officer to oversee operations, promote radio station remains) sustainable practices, and enhance infrastructure at key attractions. • Bonuyong (WWII Japanese Î Visitor experience and product development. Collaborating with liveaboards to create land-based living quarters) cultural tourism products for visitors (e.g., traditional dance and foods). Î Small-scale accommodation. Developing small-scale accommodations (e.g., bungalows). Future opportunities Î Skills and workforce development. Building local capacity and attracting returning residents for • Mihari Japanese Lookout remains tourism jobs. Î Transport infrastructure. Investing in stable and consistent transportation means. Sources: Hatohobei State representatives (interviews, April 2024); Hatohobei State Master Plan FY2024–2034 (Draft); Helen Reef Management Plan 2011–2016; and PVA data and printed/online information resources. 26 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis This section draws on state-specific information and data together with anecdotal findings from consultations across national government agencies, the private sector, NGOs, and the wider community to inform a tourism situation analysis for Palau. It summarizes the current context across key tourism topics, referring to the historical context where applicable and noting relevance for the future. This situation analysis is critical to informing evidence-based objectives and priorities for the STS. 4.1. Tourism Demand International Visitor Arrival Patterns Since 2010 Palau experienced minor fluctuations in international visitor arrival numbers before 2010, but the period after has been marked by more unstable arrival patterns and a significant decline in numbers (Figure 6).16 Figure 6. International Annual Visitor Arrivals to Palau (CY2010 to CY2024) 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Source: Palau Immigration data analyzed by calendar year (CY). After 2012, Palau’s international visitor arrival patterns diverged from global and regional trends (Figure 7). While visitor arrivals in the Asia–Pacific region grew year-on-year until the global pandemic hit in 2020, Palau saw a drop in 2013. This was followed by a strong but brief rebound, peaking in 2015, after which a sustained decline continued into the pandemic. Figure 7. Comparing Visitor Arrival Patterns in the Asia–Pacific Region with Palau (CY2010 to CY2023) Visitor Arrival Pattern for Asia-PaciÞc 2010-2023 Visitor Arrival Pattern for Palau 2010-2023 350 0 2019 Arrivals Yearly 300 COVID Crisis Recovery CY2023 = 66% of 2019 0 250 Q1-Q3 2024 200 2019 Arrivals Yearly = 85% of 0 150 Q1-Q3 2019 COVID Crisis Recovery 100 CY2023 = 44% of 2019 0 50 Q1-A=Q3 2024 = 59% of 0 Q1-Q3 2019 2010 2012 2014 2016 2018 2020 2022 2010 2012 2014 2016 2018 2020 2022 Interna2onal tourist arrivals (million) Interna2onal tourist arrivals (million) Source: UN Tourism Dashboard 16 Before 2010, there were a few disruptions to growth in visitor arrivals, e.g., in the late 2000s due to the global financial crisis. Palau Sustainable Tourism Strategy 2025–2028 27

4. Country-Level Tourism Situation Analysis As the impacts of COVID-19 on The following snapshot of arrivals by to decline due to the Government global travel subsided in 2022, visitor market pre-COVID summarizes the of Palau’s decision to curb arrivals to most destinations, including historical context dating back to 2010: uncontrolled growth by reducing Palau, began to rebound. However, the number of charter flights from • Fifteen years ago, Palau’s top three as shown in Figure 7, the recovery China. It also coincided with the source tourism markets were Japan, rate for Palau has been much slower. Chinese Government’s tightening Taiwan, and South Korea. In their In 2023, Palau had recovered just 44% of restrictions on organized tours peak year of 2012, almost 40,000 of visitor arrivals from the pre-COVID to Palau due to it not having an visitor arrivals were recorded for baseline year of 2019, compared with approved destination status. Japan and Taiwan, respectively, the Asia–Pacific regional average of and almost 20,000 for South Korea. 66%. The most recent UN Tourism data • For the remaining markets with However, there was a decline in all shows that although Palau’s recovery lower visitor volumes, fluctuations three markets thereafter. This has was improving in the July to September occurred but were less intense. been attributed to the rapid growth quarter (at 59% of Q1 2019 arrivals), Arrivals from the USA and Canada in tour groups from China displacing it was still lagging behind the regional were approximately 8,000 in 2010, or deterring these markets, alongside average for the same period (85%).17 peaked mid-decade at around 8,800, a reduction in respective air services and then decreased to about 8,200 and the closure of Palau’s main International Visitor Arrival in 2019. Meanwhile, the European attraction, Jellyfish Lake, in 2015 Patterns by Geographic markets recorded around 3,900 and 2016. Source Markets visitors in 2010, followed by uneven • For China, visitor numbers grew growth to a peak of about 5,600 in The volatile arrival patterns since swiftly after 2012 due to an increase 2013 and then an uneven decline to 2010 represent uneven shifts across in charter flights from Hong Kong about 3,700 in 2019. Finally, arrivals different geographic markets. Figure and Macau that catered to travelers from the other markets combined 8 charts the peaks and falls by market from mainland China. However, after were about 4,700 in 2010 and, after before COVID-19 and tables the relative reaching a peak of almost 90,000 experiencing fluctuations, reached an recovery rates since. arrivals in 2015, the numbers started all-time high of around 4,800 in 2019. Figure 8. Visitor Arrivals to Palau by Geographic Source Markets Since CY2010, Including Recovery Indictors Current Recovery Indicators by Market CY2024 arrivals CY2024 arrivals CY2024 arrivals by market (as % of peak year) (as % of CY2019) 100,000 JAPAN 5,936 15% (2012) 30% 90,000 SOUTH KOREA 747 4% (2012) 6% 80,000 TAIWAN 12,243 32% (2012) 79% CHINA 18,236 21% (2025) 61% 70,000 USA & CANADA 10,234 116% (2015) 125% 60,000 EUROPE 3,442 61% (2013) 93% OTHER 5,346 111% (2019) 111% 50,000 TOTAL ARRIVALS CY2024: 56,184 CY2019: 93,723 40,000 30,000 20,000 10,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Japan South Korea Taiwan China USA/Canada Europe Other Source: Palau Immigration data and UN Tourism Dashboard 17 While comparisons to Guam and Saipan suggest Palau is recovering relatively well, this regional analysis is more telling. 28 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis By 2019, before the pandemic caused a significant drop in demand across all markets, visitor arrivals to Palau from most markets were already relatively low. As shown in Figure 8, although travel has resumed from all markets, by the end of 2024, every market—except for North America—still falls short of their 2019 arrivals benchmark and is significantly below their peak years. • Japan. Arrivals to Palau have been slow to recover since the pandemic, with 5,936 recorded for 2024 (70% • Taiwan. Arrivals to Palau are • USA and Canada. North America is below 2019 benchmarks). According showing positive signs of recovery the only market that has exceeded to a market research report by the after COVID-19. In 2024, there were 2019 levels, with 10,234 visitors Chung-Hua Institution for Economic 12,243 visitors recorded (79% of recorded in 2024 (125% of 2019). Research (CIER), Japanese outbound 2019 levels). This improvement is This increase is primarily due to travel has been affected by the a result of a targeted marketing a surge in US military arrivals. weak yen and a rise in domestic initiative and an increase in flights. Market insights suggest that despite and regional tourism preferences.18 Looking ahead, 2025 seems Palau being considered a high-cost However, this market’s interest promising as market insights suggest destination for leisure travelers from in nature-based travel, combined that Taiwan is poised for a strong the USA and Canada, there is growing with Palau’s efforts to increase air rebound. According to CIER, this interest from high-value segments. access (Section 4.4) and associated resurgence is driven by a growing marketing activities, is expected • Europe. Arrivals from Europe, interest in ecotourism and positive to help recovery from Japan as primarily from Germany, have traveler sentiment toward Palau.20 economic conditions improve. almost recovered post-COVID, • China. Signs of recovery of arrivals with 3,442 arrivals recorded in • South Korea. For Palau, this market from China are evident, with 18,236 2024 (93% of 2019). This high-value is experiencing the weakest recovery visitors recorded in 2024 (61% market, in particular the diving levels, with just 747 arrivals recorded of 2019 levels). This increase has segment, continues to be a priority in 2024 (down from 940 in 2023)— occurred despite the absence of PVA for PVA’s targeted low-cost marketing a recovery rate of just 6% compared marketing activity in the market, activity. However, a conservative to 2019. CIER research indicates and mainly due to the resumption outlook is being taken due to the price sensitivity, a focus on value for of charter flights (Section 4.4). With current geopolitical situation, air money, and post-pandemic caution more incoming flights from Hong access challenges, and consumer about travel have constrained Kong at the time of writing, and sentiment about Palau being a outbound travel from South Korea.19 considering the size of this market, high-cost destination. Slow recovery for Palau is expected arrivals from China are expected to to continue with such consumer • Other markets. Although small in rebound strongly in 2025. Anecdotal sentiment, with no airline plans number, arrivals from the other accounts suggest that the China to resume direct air services in the markets combined exceeded 2019 market for Palau is shifting toward short term and a limited supply of levels in 2024 by 11%, with 5,346 a higher-spend, free independent dive operators in Palau that cater visitors. This recovery is expected traveler profile; however, this has to this market. to be further driven by Australia yet to be evidenced with data. (due to new flights; Section 4.4) and the Pacific region (driven by the Pacific Mini Games in 2025 and the meetings and events market). 18 Chung-Hua Institution for Economic Research (CIER). 2024. Post Pandemic Recovery and Diversification [presentation to Government of Palau in October 2024]. p. 18. 19 Footnote 18, p. 20. 20 Footnote 18, p. 30. Palau Sustainable Tourism Strategy 2025–2028 29

4. Country-Level Tourism Situation Analysis International Visitor Profile Palau currently has limited data on the traits and behaviors of its international visitors, making it difficult to determine profiles and trends. However, this situation is expected to improve soon, as PVA and MOF plan to conduct an international visitor survey (IVS) regularly.21 In the meantime, the following insights are available on visitor length of stay, per-person receipts, and visitor activity. Visitor Spend $267 FY23 receipts per visitor night estimated average Visitor Average Length of Stay (ALOS)* 40% higher 50% higher FY24 Data source: USGS. than FY19 than FY15 5.8 nights up from 5.2 in FY19 ALOS by source market FY24 8 Visitor Activity 7.9 7 7.5 7.3 6 5 5.8 5.2 5.0 USA and Canada 4 4.5 South Korea Scuba diving Swimming Sightseeing 3 25% 27% 19% 2 1 Europe Other Japan China Taiwan Cultural or FY19 8.6 7.4 6.8 4.1 4.6 5.1 4.3 Shopping historical tours 12% 9% Data source: USGS. *Immigration records suggests a different ALOS by calendar year. Fishing Sailing/Kayaking Honeymoon 3% 3% 1% Data source: Visitor Entry Form 2024. 'Purpose of travel' is used as an indicator of activity uptake. Due to changes in questions, historical comparisons cannot be drawn. 21 Palau conducted an exit survey in 2014 but has not undertaken one since. This data collection method (now commonly known as an international visitor survey (IVS)) is critical for tourism monitoring and planning. It provides a profile of visitor travel preferences and behaviors—and informs trends—according to variables such as travel research sources, booking methods, motivations to choose the destination, mode of travel, spend (before and during the trip), activity uptake (by type, special interest, location), satisfaction levels, and other factors of interest (e.g., traveler views, actions relating to sustainability). 30 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis Palau’s Current account all of the following variables, (i) vastly conflicting views among Challenge in Forecasting which will evolve in the coming Palau’s tourism stakeholders about what months/years: visitor numbers are preferred now and Tourism Demand in the future, and (ii) a lack of evidence i) the recovery patterns of arrivals Modeling reliable demand forecasts about what tourism carrying capacities to Palau by market; for a small island destination relies are possible now and in the future. on several key factors: (i) historical ii) air services and seat capacities; arrival data that show clear trends by Palauans rightly assert that their iii) market-specific travel prospects (e.g., country should be able to limit the market, (ii) data on anticipated airline/ traveler sentiment about travel in number of visitor arrivals if necessary. other access capacities, (iii) plans for general and/or travel to Palau); and This was evident in 2015 when it was marketing, and (iv) growth assumptions based on these factors and any other iv) interventions led by Palau, including determined that the rapid increase in known external factors. For Palau, efforts to drive visitation (e.g., PVA tourists needed to be curbed for three however, this is limited by marketing) or control visitation levels reasons: (e.g., policies to manage growth). i)  The high number of visitors was i) the pre-COVID decline in visitor arrivals, with uncertainty about the placing pressure on the environment Palau’s Current and society;22 extent to which this trend would have continued or reversed had the Challenge in Setting ii) The growth was driven by high- pandemic not occurred; Visitor Arrival Targets volume, vertically integrated charter ii) signs of a slow rebound from the Demand growth scenarios is one of two package tours, which generated pandemic, although it is too soon essential inputs for setting visitor arrival relatively low tourism revenues for to form conclusions about recovery targets for a destination; they indicate Palau; and trends; and what is possible for a destination from iii) The growth was dominated by a the market perspective. The second iii) current uncertainty regarding single source market, which displaced essential input is agreement among the availability of air services and and deterred other markets. tourism stakeholders about optimal capacities over the next few years. visitor numbers and growth rates. This While most stakeholders seem to indicates what is preferred and possible agree that this measure was necessary Therefore, a cautious approach to from the destination perspective. at that time, others believe it was forecasting demand is taken for this an overcorrection that resulted in strategy. It poses potential upper and Palau faces constraints with both the sustained decline that followed. lower limits for recovery and growth of these inputs, making it difficult Recent consultations revealed that scenarios leading up to 2028, based on to set visitor arrival targets. Further stakeholders’ views on the optimal the information available at the time to the above noted challenges with number of visitors to be pursued of writing (Figure 9). These scenarios forecasting demand, determining through the STS varied significantly. should be updated regularly, taking into optimal visitor numbers is limited by Figure 9. Mapping the Bounds for Recovery and Growth Scenarios for International Visitor Arrivals (CY2025–2028) 180,000 160,000 140,000 120,000 If recovery speeds up and high growth ensues to 2028 100,000 Herein lies countless growth scenarios that could emerge from current conditions, depending on how multiple 80,000 variables evolve. As more trends and insights become evident, more reliable demand forecasts can be charted. 60,000 If recovery continues at a slow rate to 2028 40,000 Lower limit assumption: Upper limit assumption: It is unlikely that arrivals It is unlikely that growth will 20,000 will decline unless there occur at a rate that results in are further extraordinary arrivals reaching 120,000 0 circumstances. after just 4 years (if it does, 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 it will likely raise concerns about capacity to manage such growth rates). 22 Reported negative environmental impacts included damage to sites due to too many people at popular sites and the effects of too much sunscreen in the water. Negative social impacts included the increasing costs of food for residents. Palau Sustainable Tourism Strategy 2025–2028 31

4. Country-Level Tourism Situation Analysis On the lower end, some proposed Further to this, stakeholders shared 4. Implications of tourism growth an optimal number of around 40,000 the following common sentiments: on the workforce, food supply, visitors, considering environmental and public infrastructure. This • Annual targets can increase over and social sustainability. However, requires improved collaboration time, provided the growth rates this would compromise the economic among tourism leaders and the consider the following six factors: sustainability of the sector, given agencies responsible for these that many tourism businesses are 1. Carrying capacity limits for factors to share data, develop still struggling to recover after a tourism sites—which have and implement compatible plans, difficult period. yet to be determined in Palau. and define limits if necessary. Sustainable tourism arrival On the higher end, an optimal 5. Evidence of the economic targets cannot reliably be defined number of 200,000 plus visitors was impacts of increases and until evidence-based carrying proposed. However, based on current decreases in tourism numbers capacities are determined to market evidence, achieving this in by markets/segments. While prevent environmental damage the next few years seems unlikely some valuable economic to sites (e.g., in Rock Islands without significant interventions. modeling on this has been Southern Lagoon). Moreover, at this time—and for the undertaken by USGS, the

2. Evidence of the environmental implications of different arrival next few years—200,000 visitors are and social effects of increasing numbers for the economy are likely to be (i) more than what Palau’s tourism numbers on places not well understood by most attractions can handle without risking and people—which have yet tourism stakeholders. environmental damage, (ii) more to be monitored and measured. than what the available workforce 6. Market demand evidence and This is necessary on an ongoing can support, and (iii) more than what prospects. As discussed in the basis to identify emerging risks the community can tolerate without previous subsection, updated and respond with remediation experiencing negative social impacts. visitor arrivals scenarios with measures or by revising carrying new market and access data While there were wide-ranging capacities and growth targets. will identify credible trends to views about the optimal number of 3. Availability of accommodation inform target setting. visitor arrivals to target in the new and tourism products to meet strategy, most stakeholders believed the specific expectations of • Targets should have limits imposed that aiming for 80,000 to 110,000 high-value target segments. This or be revised down if any of the visitors over the next few years includes assessing accommodation above data indicates this is necessary. would be reasonable. occupancy rates and attraction visitation levels alongside the suitability of both to attract high-value tourists, which have yet to be assessed. 32 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis Defining Visitor-Related Goal Interim Annual Targets Goals and Interim Targets Attract visitors at a sustainable pace • CY2025: 69,000 for the STS and level, i.e., one that • CY2026: 84,000 Despite Palau’s challenges in setting i) is possible from a market • CY2027: 99,000 visitor arrival targets, and despite perspective (based on available • CY2028: 114,000 global debate about whether visitor demand data); and arrival numbers should be a measure (All interim targets are subject to annual ii) is preferred and possible from of success, this strategy defines a goal review based on evolving data.) the destination perspective, taking for visitor arrivals along with interim into account These targets are lower than the FY2027 targets. Without defined targets, we target of 150,000 identified in the Palau cannot effectively plan for sustainable a) what can be supported with Development Plan 2023–2026, which destination development, increasing the targeted marketing, airline route was set when recovery scenarios were risk of uncontrolled development. This development, and other relevant expected to be more optimistic than strategy is also based on the view that interventions; what has evolved. The above CY2026 we must be intentional but flexible. Our b) growth rates that are not too target—about double the arrivals for targets can—and should—be revised fast nor too large to risk negative 2023 and representing 89% recovery of over the life of the strategy and beyond impacts on Palau’s environment 2019 volumes, is slightly higher than the in response to evolving conditions (refer or society; and Pacific Asia Travel Association’s (PATA) to the six factors noted above). “severe” recovery scenario of 87% for c) growth that supports the Therefore, based on extensive the Asia–Pacific region. financial sustainability of tourism consultation and research, the following businesses and the economic volume-based arrivals goal and interim In addition to the volume-based sustainability of the sector. arrivals goal and targets, two additional targets are defined for the STS: demand-related goals and targets have been determined for this strategy. As detailed in Section 2, these are the economic contribution of visitors (dollar value) and visitor profiles (percentage growth in high-value visitors). Palau Sustainable Tourism Strategy 2025–2028 33

4. Country-Level Tourism Situation Analysis 4.2. Tourism Supply However, the pandemic led to most development plans being paused, – Accommodation and many existing accommodations went into hibernation for an extended As of late 2024, Palau has 94 licensed period. Three properties also closed accommodation providers, operating permanently during this time. Since ~2,000 rooms—the highest number the pandemic, 11 new providers recorded to date. This represents a (~150 rooms) have launched. Table 50% growth in room supply since 2011, 2 summarizes the current supply by notwithstanding fluctuations during type.24 An additional nine properties that period. Prior to the COVID-19 (~575 rooms) are expected to open pandemic, a significant increase in within the next year.25 These include room stock (~4,000 rooms) was hotels and resorts ranging in size from expected for the years to follow.23 8 to 220 rooms, as well as one smaller bungalow property. Table 2. Current Operating Accommodation Supply in Palau by Type (Dec 2024) Accommodation Average Size by # Providers # Rooms by Type Type (# Rooms) Hotels 38 1,309 34 Resorts 7 288 41 Land-Based Apartments 21 197 9 Motels 11 130 11 B&B/Homestay 11 44 4 Bungalows 3 13 4 Hostels 3 18 6 Liveaboards 8 75 9 TOTAL (Dec 2024) 94 2,074 Figure 10. Room Distribution (% share) Figure 11. Number of Land-Based Properties by Accommodation Type (Dec 2024) and % Share of Rooms by State (Dec 2024) Hotel 63% Koror (68) 88% Resort 14% Apartment 9% Airai (2) 4% Motel 6% Melekeok (1) 4% Liveaboard 4% B&B/Homestay 2% Peleliu (10) 3% Hostel 1% Other: Ngaraard, Ngiual, Kayangel (5) 1% Bungalow 1% 23 Based on EQPB data for 2018 and as referenced in: Island Times. 2018. Construction Boom in Palau to Yield 4K Rooms in Coming Years. 10 October. 24 Based on official PVA records. There may be other properties. 25 Based on EQPB approvals. Does not include unapproved applications to FIB and EQPB. 34 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis Key Accommodation • Unofficial sources indicate that However, the average occupancy levels Insights several sites have been identified for other years, and the downward for future accommodation trajectory in arrivals after FY2015, • Hotels and resorts dominate the developments, but no public indicate an oversupply of rooms and room supply in Palau, accounting for list is currently available. account for corresponding fluctuations 77% of the total. The supply of short- and decline in average room rates prior term rentals (e.g., apartments) has • An estimated 76% of accommodation to COVID-19. reportedly grown in recent years businesses in Palau are locally due to the increasing popularity of owned,26 with the remainder operating as joint ventures with Figure 12. Room Supply Airbnb among global travelers. (FY10–FY23) foreign investors on state/private • Accommodation supply is land lease arrangements. 2,000 90% concentrated in Koror, which has 80% ~1,750 rooms, representing 85% of • Market analysis of Palau’s 1,600 70% Palau’s current total room inventory. accommodation supply is currently 1,200 60% 50% This number is expected to grow by limited. However, this gap will be 40% an additional 230 rooms over the addressed by the introduction of 800 30% next year, with the opening of four the IVS and its subsequent report. 20% 400 new properties. Traveler reviews on third-party 10% websites and anecdotal insights 0 0% • Melekeok, Airai, and Peleliu are indicate a need to improve the FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 slowly increasing their share of quality of some accommodations the accommodation supply. The in Palau to align with the price opening of Melekeok’s first hotel point benchmarks of comparable in 2024 added 75 rooms to Palau’s Figure 13. Average Occupancy destinations and the expectations inventory. Airai has four properties Rates (FY10–FY23) of high-value tourists. scheduled to open within a year, 2,000 90% $180 increasing its room count from 91 A Snapshot of 80% $160 1,600 70% $140 to 430. Meanwhile, Peleliu’s offering Accommodation 60% $120 of several smaller-scale properties Performance Indicators 1,200 50% $100 will increase by one property 40% $80 (4 rooms) in 2025. Accommodation performance indicators 800 30% $60 are 400 difficult to track, but the USGS in 20% $40 • In the remaining states, three Palau conducts a useful analysis of 10% $20 (Kayangel, Ngaraard, and Ngiual) economic data to estimate the growth 0 0% $0 have small-scale accommodations, FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 of land-based accommodation supply, while nine have none. Most of average occupancy rates, and average these smaller accommodations room rates. The annual figures for these are considered adequate for the indicators from FY2010 to FY2023 are type of international travelers shown in Figures 12, 13, and 14.27 Figure 14. Average Room Rates currently visiting (e.g., explorers (FY10–FY23) and researchers); however, 2,000 A90% growing inventory of rooms in the last $180 improvements to the quality decade, 80% combined with changes in visitor $160 1,600 of services and facilities would arrival numbers, account for the peaks 70% $140 be beneficial. and 60% falls in annual occupancy levels $120 1,200 50% $100 before bottoming out during COVID-19. •800Currently, three properties—two 40% FY2012 (the peak year for arrivals from $80 30% $60 under construction and one planned South Korea, Japan and Taiwan) and 400 20% $40 —carry international brand names. FY2015 (the peak year for arrivals 10% $20 0 from 0% China) generated satisfactory $0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY10 FY11 FY12 FY13 average occupancy levels (70%–80%). FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 26 This figure may be lower due to the unknown number of “front business” arrangements. 27 USGS analysis is undertaken on a financial year basis based on tax data provided by the government. FY2023 is the most recent data available. Palau Sustainable Tourism Strategy 2025–2028 35

4. Country-Level Tourism Situation Analysis For most accommodation providers, Conclusion on the pandemic intensified pre-existing Accommodation concerns about low occupancy levels Supply and Priorities and unstable room rates. According to USGS estimates for FY2023, average Palau has a good mix of accommodation occupancies for land- accommodation types, including based accommodation was just 20%, small-scale local establishments with mid-range accommodation that offer a quintessential Palauan faring the worst.28 Although occupancy experience, convenient apartments, rates reportedly showed some and larger hotels and resorts that improvement in 2024, they still fall short provide the critical mass of rooms of what most business owners need to typically required for destinations to be financially sustainable. Compounding attract air services. These include a few this concern, USGS analysis indicates that high-end international brands, which average room rates are relatively low— help Palau gain marketing exposure to back to levels seen more than a decade global target audiences. ago—despite rising operating costs. In the short term, new accommodation This appears to be affecting higher-end developments should be pursued with properties the most. caution due to several factors, including Recognizing that accommodation supply The low rates can be attributed to two (i) a protracted period of low occupancy requires long-term planning, it will main factors: (i) some providers have rates combined with falling room rates, also be important during the life of this chosen to discount their rates as (ii) about 575 new rooms becoming strategy to a business recovery tactic, and/or available in the next year, (iii) concerns i) determine the future supply mix (in (ii) some providers need to discount about the capacity of local wastewater terms of size, type, and international their rates due to a decline in quality infrastructure in some locations (Section brands) to attract high-value tourism (and their inability to invest in necessary 4.5), (iv) a current shortage of workers, segments in the long term based on improvements). Both situations pose a and (v) uncertainty about demand recovery trends and future prospects; risk to Palau’s intention to target high- recovery. Therefore, the immediate value tourists. Firstly, it is difficult to focus for accommodation in Palau ii) identify investment-ready sites in recover rates after giving the impression should be on new high-potential locations for of a discount destination. Secondly, it future accommodation development; i) improving the quality of existing is difficult to restore a reputation after supply (e.g., by introducing minimum iii) scope the needs and opportunities questions about quality have been standards and programs to support for joint ventures where foreign raised in markets. accommodation enhancement); and capital is needed; and New high-end properties opening ii) launching new properties (those iv) monitor the short-term/apartment in 2025 will play an important role recently opened and under accommodation market to in resetting price points and quality construction) to enhance Palau’s understand its impact on residential standards, helping to refresh Palau’s profile and appeal to high-value housing stock and any potential image as a value-based, rather than tourism markets. regulatory implications. price-based, destination. However, this effort must be supported by improved air access and marketing to ensure that the existing supply can regain the occupancy and revenue levels needed to undertake necessary reinvestment and remain financially viable. 28 In the absence of an accommodation rating scheme in Palau, USGS consulted with industry experts to develop an informal approach to grading properties for indicative analysis purposes. Grade A applies to those considered to be “high-end.” Grades B, C, and D reflect a scale down through mid-range to budget, while a “remote accommodation” category is applied separately. 36 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis 4.3. Tourism Supply Palau places great importance on the The next era of tourism development in quality of service provided by tour Palau depends on the continuation and – Products and operators to visitors. In recent years, strengthening of these efforts to ensure Visitor Experiences many efforts have been made to ensure that tour operators and guides uphold that tour operators do the following: Palau’s reputation for authenticity, The Rock Islands Southern Lagoon safety, and sustainability. Efforts • Deliver informative and must also focus on developing tour (RISL) has long been the basis of culturally authentic information. operator/guide entrepreneurship and Palau’s commercial tourism products. The upcoming national tour guide employment opportunities for Palauans. In recent years, however, tourism training and certification program— leaders and site custodians have been developing and promoting a based on a program pioneered by Boat Operators Koror—will ensure that information growing number of land-based visitor Palau currently has 66 boat owners about places is presented by experiences, showcasing Palau’s nature- registered with the Boat Owners authorized people in an accurate based, historic, and cultural assets. In Association for Tourism—a group and respectful way. This initiative is addition to the marine and terrestrial established under the National Tourism supported by regulations that require visitor experiences detailed in the state Regulations in 2018 to ensure safety all tours to be hosted by a Palauan profiles, this section provides an overall and quality in serving tour operators tour guide.29 analysis of Palau’s supply of tourism and visitors alike. Although their current products and visitor experiences by supply of boats (210) is considered • Adhere to safety measures. The type, giving consideration to future sufficient, reports suggest it is often safety of tour operator clients and needs and opportunities. difficult for tour operators to find staff is ensured through several measures under the National Tourism an operator/driver. While there is a Tour Operators and Guides requirement for all boat operators to be Regulations governing tour operators. There are currently 52 licensed local While regulations covering tour Palauan, exceptions can be granted for tour operators and an estimated 235 guides are still being finalized, they a fee if a driver is unavailable. In terms guides delivering tours to Palau’s marine will also include safety requirements. of safety, while all tour boat operators and terrestrial sites. Among these Additionally, safety topics will be are required to take a test and have six operators, 31 specialize in scuba diving, included in the tour guide training months experience, they will soon be and the majority are based in Koror. and certification. required to undertake a boat handling Most tour operators in Palau serve practical exam, and those operating clients from a single source market, • Follow environmentally sustainable vessels 50 foot and above will need to focusing on established business practices. The National Tourism do a Basic Sea Safety training course. relationships and catering to specific Regulations governing tour operators cultural and language requirements. and tour guide training also cover sustainable tourism practices. In Consultations indicate that while addition, Palau’s adoption of the there are enough tour operators to global Green Fins program in 2017 meet the current market demand, the provides dive operator training and supply limits growth for some markets certification in best practices for (e.g., South Korea) due to a shortage sustainable marine tourism. In 2020, of operators. Additionally, there are a terrestrial equivalent (known as reports of an insufficient number of Green Boots) was created to deliver tour guides with the necessary skills similar guidance for land-based and attitudes to serve the needs of tours. Although both programs are tour operators. currently inactive due to resource limitations, plans are underway to revive them (Section 4.8). 29 Notwithstanding the importance of this factor, it also presents challenges to some tour operators in the current context of a shortage of willing and skilled workers (4.6). Palau Sustainable Tourism Strategy 2025–2028 37

4. Country-Level Tourism Situation Analysis Marine Visitor Experiences different locations, thereby reducing pressure on popular sites (e.g., RISL). Box 2. Tourism in Palau is renowned for its marine Additionally, it is generating new Conservation Areas visitor experiences, which include income opportunities in different and Historic Places swimming in Jellyfish Lake, sightseeing places. However, the level of market boat trips in RISL, and scuba diving or Palau has 38 marine-based readiness of these sites varies greatly, snorkeling in Koror and Peleliu. Many conservation areas, of which 30 and concerns about potential damage scuba divers also venture further to are currently open to visitors, with remain, highlighting the need for other popular sites. conditions in place (e.g., catch and ongoing support to custodians in release for fishing and other “no- addressing these challenges. Other water-based activities have been take” rules). expanding to sites beyond hotels. For The growth in new attractions is being example, several organized kayaking Palau has 184 terrestrial complemented by the development and paddleboarding tours are available conservation areas, of which of intangible visitor experiences, such to see mangroves and other coastal 140 are currently open to visitors. as attending or joining a local dance areas, and catch and release fishing performance, enjoying local cuisine, and Palau has 198 registered historic tours are readily available. participating in other cultural activities. sites, of which 95 are currently The Alii Pass program, launched in open to visitors. Anecdotal market feedback highlights 2019, has been instrumental in leading Palau’s marine experiences as world- land-based product development for Stakeholder consultations indicate class, but there is a need to manage a package of tangible and intangible support for keeping these sites visitor numbers at some dive sites. visitor experiences. This initiative is a open for tourism and for the Feedback also highlights the potential partnership between national and state establishment of new sites, for expanding marine experiences into governments and local communities. To provided that new locations. For privately owned date, MOUs for the Alii Pass have been shorelines, this presents opportunities i) sustainable tourism practices formed with nine states, but they are at for landowners to develop commercial prevent any damage; and various stages of delivery.30 Expanding activities. However, since most of the the supply of land-based commercial ii) revenue goes to custodians and prospective sites for marine activities products and experiences will require conservation efforts. are state-owned, state authorities will need to lead most of this type of i) identifying more public, private, or Palau has a good supply of shops product development. community sites and opportunities selling souvenirs, but market feedback for unique experiences; Terrestrial Visitor indicates an opportunity to offer more ii) monitoring visitor feedback on locally produced quality souvenirs. Experiences satisfaction levels and adapting Palau has many land-based tourism experiences accordingly, ensuring Koror has a walk-in Visitor Information attractions. Nature-based sites include environmental and cultural integrity Center run by PVA. Establishing an waterfalls and picturesque landscapes. are maintained; and additional information center in Cultural/historic sites include traditional Babeldaob would benefit visitors, as iii) investing in sustained product would digital applications providing village meeting houses (bai), ancient development support to strengthen real-time information for visitors. stone monoliths, colonial heritage, and market readiness and sustainability. World War II sites and artifacts. Built attractions include the Capitol building, Other Visitor Services museums, and the aquarium. Koror and Peleliu have a good supply of An increasing number of sites are restaurants that meet the expectations being developed for tourism, with of international visitors. Additionally, investments in site infrastructure there are a few restaurants located and personnel, such as guides and elsewhere on Babeldaob that attract attendants. These developments are day-trippers and highlight the potential enhancing Palau’s tourism appeal and for further development in the future. helping to disperse visitors across 30 Airai, Aimeliik, Angaur, Melekeok, Ngaraard, Ngarchelong, Ngatpang, Ngchesar, Ngiual, and Peleliu. 38 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis 4.4. Air Access Air Access: Key Findings with airlines are conducted through different channels, and Infrastructure The following key findings about including high-level discussions tourism-related air access have been with the President, the Minister Transport Infrastructure concluded from available historical and for PII and/or the Minister for current data on air services to Palau and Policy and Planning HRCTD, PIAC, and sometimes PVA. qualitative insights from stakeholders. As there is no clear mandate for The NIIP and PDP strategies for air

1. As of late 2024, the number of route development, these efforts transport support tourism through flights to Palau is 60% lower are not happening in a strategic the intention: “to plan for and build than it was before COVID-19. and coordinated way. air service facilities, and certification In 2019, Palau received 1,150 3. Palau has made considerable of airport personnel to maintain the flights. Although seat capacity is improvements in air services safety and regulatory environment as not known, it is also assumed to data management in the past two the demand for air services increases.”31 be considerably lower. As shown years. The establishment of the Both plans recognize the need for air in Figure 15, flights from some Coordinated Border Management services in Palau to develop alongside markets have returned to pre- Working Group in 2022 has led to the increasing demand from tourism. COVID levels, while others have better tracking of aviation/airline The opening of the new Palau either resumed less frequently data. However, there is a need to International Airport terminal in or not at all. The overall capacity further strengthen aviation data 2022 was a significant step for the constraints are impacting analysis, reporting, and application NIIP—providing high-quality facilities tourism recovery. across aviation and tourism with a capacity for 400,000 passenger 2. While Palau is working hard to partners for effective planning movements annually.32 In the next few increase air services, efforts are and monitoring. years, other NIIP and PDP programs limited by an uncoordinated 4. In 2023, charter flights prioritized for delivery include safety approach to route development. represented almost one-quarter measures, climate change mitigation Air service agreements with other of all flights to Palau, down from measures, technology investments, and governments are coordinated by half in 2015. According to USGS resealing runways and taxiways at the the Bureau of Aviation (BOAV) analysis of immigration data, Roman Tmetuchl International Airport under the Ministry of Public the share of charter flights from (ROR), as well as similar works for the Infrastructure and Industries all air arrivals peaked at 48% in airfields in Peleliu and Angaur. (MPII), in collaboration with FY2015 but fell to 29% by FY2019. the Palau International Airport As of late 2024, charter flights Corporation (PIAC). Meanwhile, represented a 32% share of all business development discussions arrivals, which is expected to increase in 2025. While charter flights are not an issue per se and can play an important role in opening up new markets, it is important to understand the market segments they serve due to their historical connection with low-spend tourism in Palau. It is not within the scope of this strategy to determine international air access solutions. However, it is recognized that such solutions should be developed collaboratively, leveraging the core competencies of the BOAV, PIAC, and PVA in aviation route development efforts. 31 PDP 2023–2026. p. 123. (Reflecting minor revisions to that appearing in the NIIP 2021–2030. p. 40.) 32 400,000 movements account for entry and exit of 200,000 people – local and visitors. Palau Sustainable Tourism Strategy 2025–2028 39

4. Country-Level Tourism Situation Analysis Figure 15. Air Access by Source Market Summary of Historical, Current, and Proposed Air Services USA Historical United Airlines started operating flights Current and Proposed from the USA to Palau, via Guam and Manila, in the early 2000s. In 2019, there were on CHINA average six flights per week from Guam and two flights per week from Manila. Services No scheduled or charter flights have ever ceased temporarily during COVID-19 but have operated from mainland China to Palau, but since resumed. this market has been serviced by charter flights from Hong Kong and Macau. Charters Delta Air Lines provided flights connecting the EUROPE USA and Palau, via Japan, from 2010 to 2018. increased from around twice a week in 2012, No scheduled or charter flights have operated to around five times per week in 2015, before Other non-US carriers served the USA market directly from Europe, but European travelers decreasing to three times per week by 2019. by traveling to Palau via Taipei (China Airlines) typically accessed Palau via Manila, Guam, Charter flights from Macau and Hong Kong and Seoul (Korean Air and Asiana Airlines) Korea, Japan, and Taipei when flights operated. were slow to resume post-COVID. As of late before they all ceased services to Palau. As of FY2024, Taipei, Guam, and Manila 2024, there are about three flights per week United Airlines resumed services via Guam are the main connection hubs for travelers (more during the holiday season). This is and Manila in 2021. As of late 2024, flights from Europe. expected to grow in 2025. are on average seven per week. KOREA PACIFIC ISLANDS & AUSTRALIA JAPAN Asiana Airlines began operating flights Pre-COVID, travelers from Australia and the Japan Airlines began operating flights between Seoul and Palau in 2007. In 2019, Pacific Islands typically connected via Manila between Narita and Palau in 2007. In 2019, there were three flights per week, with a or Guam. it had one scheduled charter flight per week, load factor of 73%. Flights ceased in 2020 In 2024, Nauru Airlines commenced a weekly with a load factor of 99%. Flights ceased in due to COVID-19. service connecting Palau with FSM, Nauru, 2020 due to COVID-19. Korean Air also began operating flights and Australia (Brisbane). After adding a Delta Air Lines operated two flights per week between Seoul and Palau in 2007. In 2019, Brisbane–Koror direct weekly flight for several between Narita and Palau from 2010 to 2018. there were on average two to three flights per months, this service was replaced by a Qantas Despite a reported load factor of 98%, Delta week (except in July, August, and September), Airways direct weekly flight in late 2024. ceased operations for commercial reasons. with a load factor of 75%. Flights ceased in No carrier has provided a direct flight between 2020 due to COVID-19. Japan and Palau since COVID-19, but Japan Asiana Airlines and Korean Air have yet to TAIWAN Airlines is expected to resume operations in resume services to Palau. The Government March 2025. They will offer seasonal charters of Palau continues to encourage the return China Airlines began operating flights between (December to January and July to August). of both; however, commercial decisions by Taipei and Palau in 2007. In 2019, there were on average four flights per week, with a load United Airlines has announced plans to the airlines indicate this is not a short-term operate flights between Narita and Palau prospect. Options for direct flights from Seoul factor of 83.9%. Flights ceased in 2020 due to COVID-19. from mid-2025. are also being explored with Jeju Air. TransAsia Airways serviced Palau from 2010 until the airline stopped all operations in 2016. China Airlines remains the only carrier providing a service between Taiwan and Palau. Recent efforts have brought the frequency back to four flights per week. 40 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis 4.5. Local Public Infrastructure and Services The National Infrastructure Investment Plan 2021–2030 (NIIP) recognizes that further tourism growth would place increasing demands on all public infrastructure.33 This sub-section presents a high-level assessment of the current state of various types of public infrastructure and services that the tourism industry relies on, excluding aviation, which is addressed Tourism will continue to be supported Marine Transport in Section 4.4. by the NIIP and PDP strategy for land Infrastructure and Services The following thematic summaries transport “to slowly build up the roads, causeways and bridges network and The NIIP strategy “to slowly build up the reference the goals and strategies associated safety and regulatory sea transport network and associated outlined in the NIIP, as well as those environment as the demand for land safety and regulatory environment recently reiterated or updated in the transport increases.”34 Key priorities as the demand for sea transport Palau Development Plan (PDP) 2023– such as climate proofing roads, increases”35 is supported by a detailed 2026, recognizing their relevance to upgrading dirt roads to paved surfaces, strategy in the PDP, with updated plans tourism. Relevant sector policies and rehabilitating/replacing the Malakal for upgrading the Malakal Commercial plans are also referenced, along with Bridge, and improving pedestrian Port (which has struggled with limited a brief commentary about the extent walkways will directly support tourism. capacity, congestion, and a lack of to which current supply meets tourism storage for hazardous cargo) and needs based on findings from state Palau’s public transport system is still constructing a new commercial seaport assessments and industry consultations. in its infancy. The government piloted in Babeldaob, which will help alleviate It concludes by highlighting the needs an eco-friendly public bus service pressure on Malakal. The plan also that tourism and infrastructure partners between Koror and Airai in 2024, which proposes a new government-owned must address in the future. These has had strong uptake by both locals passenger and cargo vessel to provide insights help inform transport and other and visitors, signaling the potential more consistent and less costly services tourism-enabling infrastructure strategic for a private sector entrant to scale up to remote states, as well as plans to priorities in this strategy (Objective 8). services in the future. This is important upgrade smaller jetties and wharves and as Palau’s supply of private taxis has install new navigation aids.36 The public Land Transport fallen to four, which does not meet policy and investments to be delivered Infrastructure and Services current demand levels. under these plans will support tourism Road infrastructure development has in general terms, but do not specify Tourism development needs are been a national priority since 2002. tourism-specific marine infrastructure considered in land transport planning The construction of intra-state roads to needs relating to: through ad hoc meetings with connect the social and economic hubs appropriate partners. However, there • Cruise vessels. The small cruise across Babeldaob’s 10 states and Koror is is a need to strengthen coordination ships that make infrequent visits to 80% complete. While progress has been among the agencies responsible Palau37 and the locally based Four gradual, the existing roads and bridges are for tourism and road transport Seasons Explorer cruising resort serving the tourism market relatively well. infrastructure and services, including anchor at sea and rely on tenders/ the Bureau of Public Works (BPW). lifeboats to transfer passengers 33 NIIP 2021–2030. p. 38. 34 NIIP 2021–2030 p. 41; and PDP 2023–2026. p. 125. 35 NIIP 2021–2030. p. 43. 36 PDP 2023–2026. p. 130. 37 Before COVID-19, there were about four small cruise ships per year (capacity: 100–700 passengers). There was one cruise ship visit in 2024. This is expected to increase to three in 2025 (capacity: 85–550 passengers). Palau Sustainable Tourism Strategy 2025–2028 41

4. Country-Level Tourism Situation Analysis due to the unsuitability of the iii) determining an evidence-based access to the Palau Public Utilities port. Furthermore, the current strategy for these markets, with Corporation’s (PPUC) supply of port infrastructure does not targets, market development Environmental Quality Protection adequately support the landing priorities, infrastructure and services Board (EQPB)-rated “safe to drink” and unloading of cruise passengers investments priorities, regulatory water, while those in Babeldaob have from tenders/lifeboats for local priorities, and funding sources. access to the PPUC’s supply of EQPB- tours or transportation, negatively rated “safe to wash” water. Water impacting visitor experience and Water and Sanitation tanks are used for the 5% of Palau’s safety, especially in poor weather Infrastructure and Services population not served by PPUC. On- conditions. Although Palau intends The PDP 2023–2026 reiterates the site water treatment is offered in 14 to develop the small/expedition NIIP’s goal for water and sanitation states, but EQPB-rated “safe to drink” cruise ship segment, which typically infrastructure and services in Palau or “safe to wash” water is not yet has less impact on a destination than “to provide, protect and maintain available in the outer islands. This the large cruise ship segment, this water and sanitation infrastructure/ is a typical challenge for remote effort is currently limited by the lack services on an efficient and equitable tourism businesses in any of infrastructure for berthing such basis to improve access, standards, destination, as they must manage vessels, handling tenders/lifeboats, reliability, and value for money.”39 their own supply and treatment. and processing passengers (customs and immigration). These plans summarize the current • It is recognized that tourism status and key issues for these sectors activity places additional demands • Visiting yachts. In 2024, Palau and share the following strategy: on Palau’s water resources. This received around 24 sailing yachts “The government seeks to further pressure on supply is especially and 18 motor yachts.38 This is a amend legislation and regulations concerning during droughts, as seen growing and typically a high-value in support of improved water in 1997/1998. Additionally, there market, especially for the superyacht management. The government is are concerns that new large-scale category, which can bring up to 100 investing in new plants and gradually tourism developments could “strain crew and passengers on one vessel. raising tariffs to reduce subsidies, existing water infrastructure and Improving the availability of specialty adopting new, more appropriate exacerbate environmental pressures provisioning supplies can support ownership, and has taken action on watersheds.”40 Therefore, there this segment. to strengthen water and sewer is a need to consider the destination management and to otherwise seek carrying capacities for visitors based • Local liveaboards and tour boats. on the availability of water and to improve operational efficiencies These typically use private drought scenarios. This requires and effectiveness. The government docking facilities. multi-stakeholder collaboration seeks to provide a climate-resilient, potable water supply that meets new among BOT, PVA, PPUC, EQPB, and Palau’s ambitions to sustainably expand the states to (i) consider tourism sources of demand.” the high-end, small-scale expedition growth scenarios in setting visitor cruise segment and the sailing and These strategies and the detailed targets that account for water supply superyachts markets will require priorities that follow in the documents limitations, (ii) ensure that tourism i) strengthening coordination between will serve Palau’s residents and all is factored into future government the government agencies responsible economic sectors, including tourism. investments in water supply for tourism and ports and the infrastructure and services, and A tourism-specific situation analysis (iii) identify ways to support the private sector already servicing of Palau’s water supply identified key private sector in remote areas in these markets; findings that should be considered in investing in water capture, treatment, ii) improving research and data analysis water and sanitation planning: and conservation solutions. of current cruise and yacht visits as well as market development • Palau’s tourism sector is in a A tourism-specific situation analysis prospects; and relatively fortunate position of wastewater management in Palau regarding water supply. Tourism identified key findings that should businesses in Koror and Airai have 38 Bureau of Marine Transportation 39 PDP 2023–2026. p. 132; and NIIP 2021–2030. p. 45. 40 Palau Draft Water Policy 2024. p. 12. 42 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis be considered in water and Solid Waste Management supported through annual coastal sanitation planning: Infrastructure and Services cleanups organized by various tour operators, NGOs, and community • Stakeholders expressed concern The NIIP and PDP shared strategy groups. Finally, many Palauans worry about the current and future for solid waste management states that future growth in visitor arrivals capacity to manage the volume of that “the government will gradually could overwhelm the current solid sewage generated by hotels in Koror introduce state of the art facilities waste infrastructure. and liveaboards. The draft Water and best practices to dispose of solid Policy acknowledges that “Palau’s wastes and thereby promote improved These concerns are intensified existing sewer facilities are regularly health and preserve the natural by the growth in low-value, high- overwhelmed, especially during environment.”42 impact market segments, which have periods of heavy rainfall, leading to previously been associated with an overflow and untreated discharges.”41 This initiative is supported by the increase in unmanaged trash. Like other At least two hotel properties have implementation of the Palau National areas of infrastructure, it is important to reportedly experienced sewage Solid Waste Management Strategy identify the carrying capacities of tourist overflow due to insufficient holding 2017–2026. Significant progress has destinations, taking into account the systems and pumps, which can be already been made, including the limitations of solid waste management resolved with more investment. opening of a national landfill in Aimeliik in designated tourism locations. Additionally, some liveaboard in 2021 and the waste segregation Furthermore, targets for visitor arrivals operators are reportedly not properly programs piloted by the Friends of Palau should be established in coordination disposing of wastewater due to a National Marine Sanctuary (FPNMS) with waste management planning lack of supply of pumps. With new and the Koror State Government milestones. accommodations being developed, Solid Waste Management Office there is a need to improve holding (KSG SWMO). Achieving this requires collaboration systems. This issue is being addressed among multiple stakeholders, which is Future priorities include closing and recognized in the Palau National Solid by the hotel project currently under rehabilitating the now-disused dumps, Waste Management Strategy 2017– development in Malakal, which as well as exploring waste-to-energy 2026. Such an approach needs to be aims to connect the hotel’s holding technology solutions.43 strengthened across BPW, PPUC, systems to existing lines and expand those lines to increase capacity. EQPB, the states, BOT, PVA, and NGOs Compared to many other destinations through effective planning, investments, in Asia and the Pacific, Palau appears to • Effective wastewater management and program design, including raising be a clean island nation that manages requires multi-stakeholder awareness within the industry and solid waste well. It is reported that collaboration among BOT, PVA, community awareness. business owners typically “do the PEWA, PPUC, EQPB, and the states right thing” when disposing of rubbish to (i) align tourism growth scenarios generated by tours and at hotels, with the limitations of sanitation supported by the availability of trash infrastructure and services, ensuring cans at key sites and reliable waste that realistic and sustainable visitor collection services in all states. targets are set, (ii) ensure that tourism is factored into future However, some unsustainable and/ government investments in sewage or illegal practices are reportedly still management, (iii) strengthen occurring at certain sites and public regulations and compliance areas. This is a cause of concern for mechanisms for wastewater Palau’s sustainable tourism credentials management, and (iv) identify and its “Pristine Paradise” brand ways to support the private sector promise. The growing volume of in investing in more sustainable marine debris is also a concern. While wastewater management plant the source of this debris cannot be and processes. controlled in Palau, there is a need to manage this issue, which has been 41 Palau Draft Water Policy 2024. p.23. 42 NIIP 2021–2030. p. 8; and PDP 2023–2026. p. 116. 43 Footnote 42. Palau Sustainable Tourism Strategy 2025–2028 43

4. Country-Level Tourism Situation Analysis Energy Infrastructure and Services The goals and strategies for the energy sector, as outlined in the Palau National Energy Master Plan (NEMP) (2019), the NIIP, and the PDP, focus on providing efficient and equitable services. They aim to improve access, standards, reliability, and value for money while striving to achieve the overarching goal of generating at least 45% of energy needs from renewable sources by 2025.44 While these efforts directly support the tourism sector, analyzing energy supply through the lens of the tourism industry highlights prevailing concerns about reliability and costs. Since mid- 2023, Palau has experienced power service disruptions due to temporary issues with the nation’s transition to solar energy.45 Some operators report having to resort to the high- cost, unsustainable solution of using By considering tourism growth through five pillars: digital connectivity, generators. Furthermore, the increase scenarios together, the Palau Energy enhancing digital security, promoting in tariffs over the past several years has and Water Administration (PEWA), the digital economy and innovation, placed a significant financial burden on PPUC, BOT, PVA, and the states can: transforming government services, and tourism businesses. While data on the developing digital skills and inclusion. i) ensure that realistic and sustainable number of accommodation providers visitor targets are set; A rapid analysis of ICT in tourism with their own renewable energy supply is not available, anecdotal reports ii) ensure that tourism is factored into presents conflicting accounts. While suggest more business owners would be future government investments in some reports suggest that ICT serves interested in adopting such solutions if energy supply; and Palau’s accommodation hubs well, the equipment was affordable. with businesses and visitors able to iii) identify ways to support the access high-speed, reliable internet at While the supply disruptions are private sector in investing in internationally competitive rates, expected to be overcome soon, and renewable energy solutions, such others highlight poor connectivity Palau’s capacity is considered sufficient as providing technical advice to and high costs. for growing demand, there is a need tourism businesses on evolving to determine the carrying capacities technologies and offering incentives Like other infrastructure and of destinations and set targets for for private sector investments in services, ICT sector planning must visitor arrivals that consider energy renewable energy. consider tourism growth scenarios consumption limits at designated and targets. Collaboration among tourism locations over the coming ICT Infrastructure MOF, MPII, BOT, and PVA is important years. Furthermore, strengthening and Services to ensure that public and private multi-stakeholder collaboration in investments in ICT are sufficient to meet The Palau ICT Policy (2024) builds the anticipated tourism sector needs. preparing plans for tourism and upon the goals and strategies for ICT Additionally, it is important to identify energy is important. development outlined in the NIIP and any potential limitations. PDP. The policy aims to support tourism 44 PDP 2023–2026. p. 69. 45 This is reportedly due to the instability of systems to cope with the transition from diesel to solar rather than a capacity issue. 44 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis Small-Scale Town and As Palau pursues its sustainable Sporting and Events Site Infrastructure tourism goals, it will be important Infrastructure for national, state, private sector, The main centers visited by tourists and community stakeholders to Palau’s preparation for hosting the in Koror and Airai are clean and collaborate in 2025 Pacific Mini Games included organized; however, stakeholders have upgrading the national multi-purpose emphasized the need for improvements i) identifying the facility needs of gym to international standards. The to sidewalks, street lighting, and popular tourism attractions—such national track and field, swimming pool, pedestrian crossings. Ongoing state as safely paved pathways, jetties, baseball fields, and tennis courts are planning and investment in the safety boat ramps, shaded/open rest also undergoing upgrades but are yet and aesthetics of public spaces in areas, suitable spaces for staff, to be completed at the time of writing. these hubs and the provision of public toilets, recycling and trash These venues will allow Palau to host amenities (e.g., toilets, rest stops, and receptacles, filtered water, fences, future regional sports events with trash cans) are necessary to serve wayfinding signage (leading to the up to 1,500 athletes. However, as residents and visitors alike. As other site), interpretive signage/tools identified in the NIIP, there is a need states expand their tourism offerings, (at the site), parking spaces, to construct more sporting facilities similar planning and investment may be accessibility measures, snack to grow the local and regional needed for streets and foreshores that shops, and souvenir stores—where sports markets. experience high volumes of visitors. conducive to the expected number of visitors and suitable for the The NIIP also identifies the Ongoing planning and investment nature of the site; and opportunity to construct a convention in small-scale infrastructure is also center. Palau has successfully hosted essential for Palau’s existing and ii) prioritizing investments in regional meetings with up to 1,000 upcoming visitor attractions at natural, site management plans, with delegates, including the international cultural, and historic sites. This process development controls recognizing Our Ocean Conference in 2022 and is already being managed to varying the carrying capacity of sites other regional conferences since degrees through the state master plans, (Section 4.8) and ensuring then. Existing large meeting facilities ecotourism plans, and PVA advice and conservation of the sites’ natural, include the Palau National Gym, the support to states for specific sites. cultural, and historical heritage. Ngarachamayong Cultural Center, and several hotels. However, expanding the regional meetings market will require constructing a purpose-built convention center. Health, Medical and Emergency Services Palau is a competitive destination in terms of the availability of medical services. Visitors in Koror and Babeldaob are able to access urgent medical care if needed, although services in other locations are limited due to long distances. Palau has a hyperbaric chamber in Koror to serve the dive industry, maintained by the Ministry of Health and Human Services (MHHS). The COVID-19 experience highlighted the importance of collaboration between the MHRCTD and MHHS in managing visitor controls and communications to minimize the risk of infection for both visitors and residents. Palau Sustainable Tourism Strategy 2025–2028 45

4. Country-Level Tourism Situation Analysis Ongoing preparedness planning 4.6. The Tourism for FY2024 indicate that employment for such risks requires strengthening numbers grew to almost 1,600, but the communication across these ministries, Workforce percentage share of Palauan workers ensuring that health resource needs fell to around 23%. are met without placing an undue Tourism Employment burden on the health system. Tourism Workforce Before the COVID-19 pandemic Challenges While Palau has a positive reputation disrupted travel in 2020, the tourism for law and order and is considered private sector in Palau was employing There is an overwhelming sentiment safe for visitors, it is important to an estimated 2,100 people, with among Palau’s tourism stakeholders consider police, firefighting, and Palauan workers representing 26%.46 that more Palauans should be employed marine rescue services in tourism USGS data shows that the total number in the tourism industry to ensure planning. There are concerns about of employees has been falling since (i) the authenticity of the visitor the capability limitations for each FY2016 (2,400), while the percentage experience, and (ii) that tourism income in the event of a major incident. of Palauan workers has been falling over benefits Palauans directly. However, a longer term. As the tourism sector has there are currently many challenges to As tourism grows, so will risks to yet to recover from the COVID-19 crisis, achieving this goal. Workforce gaps have the safety of residents and visitors employment estimates for FY2023 were been reported across the sector, with without adequate investment in at a more than 20-year low of 1,300, shortages of hospitality workers, boat appropriate equipment, personnel with Palauan workers representing 28%. operators, tour guides, and government training, and drills. Note: Preliminary estimates from USGS workers in tourism. The challenges are complex, as represented in the problem tree shown in Figure 16. Figure 16. A Problem Tree for Palau’s Tourism and Hospitality Workforce Palau’s tourism industry does not have the skilled workforce it needs to adequately meet current and growing demand for high-value tourism. There is a limited number of Palauans with appropriate skills It is difficult to employ appropriately skilled foreign workers and willingness to work in tourism and hospitality in Palau. to fill Palau’s tourism and hospitality workforce gaps. The moratorium T&H training T&H is not a Skilled tourism Foreign worker Foreign workers on foreign content and popular career workers are being interest in working are not currently workers changing drawn to jobs in in Palau has fallen employers within eligible to fill job modes don’t meet choice for due to reputational 5 years is limiting gaps for boat industry needs. Palauans. other destinations. issues. employment. operators. Young Palauans Training/skills Tourism is have other career gaps analysis perceived as an options with better has not been unstable career benefits (US military, undertaken. since COVID-19. overseas study, public sector). 46 Full or part-time jobs based on USGS estimates for FY2019. USGS applies social security data and graduate school estimates using supply-use table ratios of sales to tourists at a detailed industry level. 46 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis Efforts are underway to address • Employment facilitation • Research to inform policy these problems and build a skilled › PVA is collaborating with the › BHR, in partnership with the and satisfied workforce in Palau’s Ministry of Agriculture, Fisheries International Labour Organization tourism and hospitality sector. and the Environment (MAFE) (ILO), is commencing a study to These include: to design a tourism career (i) identify job opportunities for awareness campaign. youth in Palau, (ii) evaluate the • Skills development curriculum in schools/PCC, and › The Bureau of Human Resources › Palau High School offers a career (iii) assess the types of work (BHR) hosts an annual job fair path program that grants a diploma permits available for foreigners. where tourism employment for students who major in tourism. opportunities are promoted. It is important to continue and › Palau Community College (PCC) • Employer incentives strengthen these efforts and invest offers an internationally accredited in more initiatives in the future. Associate Degree Program through › Under the 2019 amendment to A critical step is conducting a training its Tourism and Hospitality School the Skilled Palauan Workforce and skills gap assessment before of Excellence. Investment Act (2014), tourism and designing solutions such as adapting › Numerous industry-led efforts hospitality employers can access PCC/other courses, incentivizing to recruit Palauans and offer the Skilled Labor Gross Revenue employers, and forging new on-the-job training.47 Tax Relief program when employing public–private partnerships in skills graduates with vocational development and employment. certificates from PCC. 47 This has been a key objective for accommodation providers such as the Palau Pacific Resort, Four Seasons, and the soon-to-open IHG/Hotel Indigo brand, among others. The Four Season’s program has extended to offering apprenticeships to Palauans in scuba diving instruction, front office, food and beverage, boat captain, and back-of-house practical training in Maldives. Palau Sustainable Tourism Strategy 2025–2028 47

4. Country-Level Tourism Situation Analysis 4.7. Conditions for Private Sector Investment in Tourism Conditions for Local Entrepreneurs and Investors in Tourism An estimated three-quarters of accommodation businesses in Palau, as well as all tour operations,48 are locally owned.49 Most tourist sites are state-owned; however, there are many examples of small-scale entrepreneurship in tour guiding, handicrafts, merchandise, and eateries. Stakeholders strongly believe that fostering more local entrepreneurship and investment is essential for the future. This will provide visitors with more experiences that are authentically Palauan and create more income-generating opportunities for Palauans. However, local business owners face several barriers to starting, improving, or growing a tourism enterprise. While these barriers vary depending on factors such as business type, size, stage, age, and location, stakeholder consultations identified a top five list of challenges. Table 3 presents this list, together with notes on associated solutions that are underway or needed. Table 3. The Top 5 Local Entrepreneur/Investor Challenges and Corresponding Solutions Local entrepreneur/investor Solutions underway and/or needed challenges

1. MSME barriers to accessing finance. • In 2024, the NDBP launched a new loan product aimed at helping small businesses access Local business owners (start-ups and credit using their homes as collateral; however, there are concerns that it may pose a risk for ill-prepared entrepreneurs. existing MSMEs) report difficulties in (i) accessing the financing needed to • Training and advice on preparing a loan application are offered to businesses by the Palau start or reinvest in their businesses, and Entrepreneurs for Growth (PEFG) and the Palau Small Business Development Center (SBDC). (ii) affording finance due to high interest The latter is currently on hold due to resource limitations. rates. Challenges with getting a loan • Palau Chamber of Commerce (PCOC) connects businesses and banks through its meetings, persist despite the availability of loans seminars, and events. from the National Development Bank of • Business grant programs have reportedly been available in the past, but many people were Palau (NDBP) and at least one commercial unaware of this. bank indicating they will lend to tourism • More research is needed to understand the financial barriers faced by tourism MSMEs. This businesses that meet requirements. The research should focus on identifying supply-side constraints (e.g., financial institution appetite main barrier cited is the inability to use land for tourism) and demand-side constraints (e.g., collateral, financial records, loan application skills) as security, while weak loan applications are to inform the design of solutions. This requires collaboration among public and private tourism also an impediment. leaders and financial institutions.

2. Weak tourism business management • PEFG provides training, advice, and space for small-scale local entrepreneurs, including those knowledge and skills. in tourism. Although this is more relevant to new or • Palau SBDC has offered training and support to businesses, with a focus on financial management small business owners, some established and loan applications, but this is currently limited by available resources. MSMEs may also lack the skills needed • PCOC provides training on topics of interest to its members. to start or operate a business (e.g., • PVA provides product and marketing advice to private tourism businesses upon request financial management, marketing, product (e.g., advice on improving market readiness and marketing). development, etc.) • BOT provides advice on business setup and compliance to private tourism businesses upon While commercial business advisory request (e.g., regulatory requirements). services can support businesses with certain • Given the range of training and advisory resources, there is a need to survey the existing functions, there is a limited supply of such knowledge and skills gaps among business owners (by types, stages, and levels of experience). services, and they can be cost-prohibitive. This survey will help identify gaps and overlaps in existing services, leading to better coordination and enhancement of programs.

3. Weak tourism industry networks. • PCOC welcomes all tourism businesses to join and benefit from networking and learning Palau lacks a widely represented, opportunities, despite the misconception that it only caters to larger businesses. collaborative tourism industry network. This • PEFG is growing a network of local micro-entrepreneurs. limits opportunities for building business • As Palau has two bodies catering to different audiences, and many business owners networks, forging commercial partnerships, are not engaged in either, PVA and BOT can play a key role in convening industry members sharing knowledge, and lobbying for for networking. industry needs.

4. High cost of doing business. • Many rising costs are a function of the market that cannot be controlled. However, as Palauan The costs of business inputs (e.g., fuel, businesses face a particularly difficult period (marked by a protracted economic crisis due to the COVID-19 pandemic, a new tax regime, and global inflation), there are calls for more support for power, labor, equipment) have increased the private sector to reduce the costs of doing business, such as subsidies for certain inputs. significantly, narrowing profit margins in already challenging times. 48 Local ownership is a legal requirement for land and sea transport operators. 49 This figure may be lower due to the unknown number of “front business” arrangements. 48 Palau Sustainable Tourism Strategy 2025–2028 4. Country-Level Tourism Situation Analysis Local entrepreneur/investor Solutions underway and/or needed challenges

5. Cumbersome licensing processes. • A mapping of all national and state permits and licenses required to start and operate different Tourism businesses require various national types of tourism businesses has commenced as part of this strategy development. Completing this mapping is important for determining ways to streamline processes and explore options for and state licenses, many of which are not reducing costs. clearly defined from the outset. These pose time and cost burdens. It is critical that this strategy • Land availability and suitability lack of incentives is a barrier to high- progresses efforts to improve the issues. There are significant priority investments and to identify business enabling environment for challenges in finding land that is which type of incentives would be local entrepreneurs and investors both suitable and available for suitable for Palau. by addressing the above challenges. tourism development. “Suitable” Coordinating efforts to avoid duplication refers to land that appeals to • Weak framework for joint of support and fill existing gaps will tourists and is easily accessible, ventures. The requirement that help achieve favorable outcomes. while “available” refers to secure foreign partnerships are limited to land titles with no risks of dispute. investments of five million dollars Conditions for Foreign Furthermore, the inability to transfer has inadvertently resulted in the Investors in Tourism leases is an additional barrier to pursuit of non-transparent and investors in Palau. illegal local-foreign partnerships. The Government of Palau recognizes the benefit of foreign investment in • Lack of investment facilitation • Corrupt practices. There are infrastructure, such as accommodation, support. Currently, FIB focuses on anecdotal reports of corrupt provided it is suitable in scale and investment approvals rather than practices involved in obtaining standards. In addition to attracting attracting or supporting investment. government permits, doing business much-needed capital, foreign Moreover, PVA does not currently with local partners, and engaging in investment opens opportunities provide a support service for tourism public procurement processes.51 for attracting international brands investment facilitation, even though to manage properties and provide the PVA Act includes provisions for It is important to create enabling global marketing reach. The Foreign this. As a result, investors often have and fair conditions for both local and Investment Act supports this process to deal with the states, landowners, foreign investors through the new and outlines the requirements and or private advisers to scope tourism sustainable tourism strategy. permissions, which are overseen by development prospects. While the Foreign Investment Board (FIB).50 this approach is not inherently problematic, it limits (i) Palau’s Although there was evidence of foreign potential to attract targeted investors investor interest in the accommodation strategically, (ii) the potential to sector in Palau leading up to COVID-19, facilitate joint ventures that benefit there are several factors reported as local partners, and (iii) Palau’s currently constraining it: capacity to influence high-priority • Uncertainty about visitor market investments or reinvestments in demand. There is ongoing high-value tourism segments. uncertainty regarding market • Lack of investment incentives. demand prospects in the post-COVID Although the Pristine Paradise environment, with relatively weak Act – High-value Tourism (2018) has recovery rates observed so far. provisions for investment incentives, As more data becomes available and it has not led to the design of specific clearer trends emerge, investors will fiscal incentives. More research is gain a better indication of prospects. needed to understand how much this 50 Foreign investors can own allowed businesses on leased land and/or participate in a joint venture with FIB approval, but they cannot own land. In the tourism sector, allowed businesses include accommodation, but not tourism or transport operations. 51 US Department of State. 2024 Investment Climate Statements (online). Palau Sustainable Tourism Strategy 2025–2028 49

4. Country-Level Tourism Situation Analysis 4.8. Environmental, Cultural and Social Considerations for Tourism Preserving the Environment and Culture in Palau Respecting the environment—Lukel a Klengar or “the nest of life”—is an intrinsic part of being Palauan. So is respecting the cultural heritage that has shaped Palau over many centuries. The preservation of both is evident in traditions and supported by a range of current practices, activities, regulations, and plans. For example: • Palau has a long-standing tradition of applying regenerative principles • Palau has an active community of • Provisions for the protection of to its oceans and lands. The “bul” development partners delivering Palau’s culture and heritage are traditional moratorium on activities projects with environmental present in the Palau National Code like fishing and farming to allow for objectives. NGOs working with Title 19, which regulates all activities regeneration demonstrates how communities include the Palau concerning cultural resources.52 ancestral customs for protecting Conservation Society (PCS), the Furthermore, Palau’s Bureau of the environment continue to be Palau International Coral Reef Culture works with the states and practiced today. Center (PICRC), and Friends of the communities to preserve historic • Palau stands out as a nation Palau National Marine Sanctuary. places (193 currently registered) and committed to protecting its Various bilateral and multilateral document oral history. environment, with 44% of its land agencies—such as Global Environment Facility (GEF), ADB, • The Palau Development Plan and 80% of its marine territory Japan International Cooperation emphasizes the importance of the currently under protection. The Agency (JICA), and PICRC—also environment and culture in two country’s exceptional environmental lead or support projects with of its four pillars: “Maintain the record includes establishing the environmental goals. environment and counter climate world’s first shark sanctuary in change” and “Nourish Palauan 2009, establishing one of the largest • Palau’s commitment to protecting culture and identity.” national marine sanctuaries in the environment during commercial the world, declaring 53 declared development is evident in its • Environmental and cultural conservation areas, pioneering the regulations, including those preservation are central to state Protected Areas Network (PAN), overseen by the Environmental planning through master plans, and managing a UNESCO World Quality Protection Board (EQPB), state-specific historic and cultural Heritage Site. which controls human activity to heritage preservation plans, and prevent environmental damage. management plans for PAN sites. 52 This Code led to several regulations for the development, rehabilitation, protection, etc., of cultural and historical heritage sites. 50 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis • Introducing the Pristine Paradise Environmental Fee. While visitor taxes are often seen as a barrier to tourism, Palau has demonstrated that an environmentally focused visitor fee can be a justified means to support sustainability efforts. In 2018, Palau introduced a USD100 per person fee upon arrival, replacing the USD30 per person Green Fee. This new fee has reportedly not hindered tourism and allows the collected funds to be directed toward environmental and social priorities. • Planning for ecotourism and community-based tourism. This has been progressed through several channels, including (i) support from GEF through PAN to prepare Safeguarding the arrival. It earned Palau international ecotourism plans for Aimeliik, Environment, Cultural recognition as a destination Ngardmau, and Ngiual (with more demonstrating sustainable tourism Heritage and People of states to follow), (ii) support from credentials, attracting visitors who the US National Park Service to pilot Palau from the Negative value these principles. Since 2023, a sustainable visitor use planning Impacts of Tourism FPNMS has extended the initiative framework in Ngardok Nature Further to the above macro to include (i) a certification program Reserve (with RISL to follow), and snapshot of environmental and for local businesses, with 60 (iii) support from the Sasakawa cultural preservation, Palau has also businesses certified as of 2024, Peace Foundation to develop demonstrated world-leading efforts (ii) a platform to direct visitors community-based tours in Airai, in sustainable tourism in recent years. who sign the pledge to certified Melekeok, Ngaraard, Ngarchelong, These efforts include businesses, and (iii) the Ol’au Palau and Ngardmau (with more to follow). initiative, which provides customized • Resisting the emergence of mass experiences for these visitors. • Developing a carbon offset tourism in the mid-2010s, when a calculator as part of a tailored rapid and steep increase in visitor • Introducing the Responsible Tourism program for visitors to Palau. This numbers began to negatively impact Education Act (2018) to provide tool allows visitors to calculate the the local environment and society. the legislation necessary to (i) carbon emissions generated by their incorporate the Palau Pledge into trip and purchase carbon offsets, • Adopting the global Green Fins the passport stamp, (ii) require with the funds directed toward program in 2019, which provides incoming aircraft and vessels to conservation projects in Palau. guidance and training to ensure communicate information about Two similar programs have been that dive tours are conducted in Palau’s environmental protection designed but not implemented yet. an environmentally safe way. This and cultural preservation policies, However, the technology is ready initiative was replicated with the (iii) reduce single-use plastics used and can be rolled out with additional creation of the Green Boots program by tour operators, (iv) ban the development and resources. in 2021 for land-based tours. importation and sale of reef-toxic sunscreen, and (v) introduce an • Keeping the people of Palau safe • Launching the Palau Pledge in 2017, accreditation and rating scheme for from harm that may result from which secures tourists’ commitment tourism businesses to indicate their tourism-related activity. Palau to preserving and protecting the environmental protection credentials. has anti-human trafficking laws, islands. This FPNMS initiative led (While activities (i) and (iv) have been workplace laws, and child abuse to the introduction of a passport implemented, activities (ii), (iii), and prevention laws, among others. stamp for visitors to sign upon (v) are still in progress.) Palau Sustainable Tourism Strategy 2025–2028 51

4. Country-Level Tourism Situation Analysis Recent consultations indicate the collaboration between the Building Resilience to the importance of continuing the progress Bureau of Agriculture (BOA) Effects of Climate Change made toward environmentally, and BOT/PVA to plan for and External Shocks culturally, and socially sustainable acceptable solutions to increase tourism in Palau. These efforts can local production (and, where Palau faces significant climate change be further strengthened by necessary, imports) to cater risks, including rising sea levels and for—and benefit from—tourism. extreme weather. These issues will be • Incorporating environmental, addressed in the upcoming revised The BOA’s Green Growth Plan cultural, and social sustainability Climate Change Policy. The OCC and 2023 considers this. measures into a tourism minimum BOT will collaborate on integrating standards program. • Strengthening awareness within climate-resilient strategies into the the tourism sector about the tourism sector. Furthermore, a National • Reinvigorating the Green Fins monitoring of, and compliance Adaptation Plan for Climate Resilience program by reassessing compliance with, regulations, standards, and in Small Island Developing States is officers and rolling out the Green guidance that safeguard places being prepared. The plan will include a Boots program. and people. This effort will require dedicated section on tourism, proposing closer coordination among BOT, policies for best practices for a climate- • Determining the tourism carrying PVA, EQPB, the Division of Marine resilient tourism industry.53 capacity limits and visitor flow Law and Enforcement (DMLE), the solutions for sites of environmental, Office of Labor Compliance (OLC), Palau’s tourism industry is also historical, and cultural significance the states, the private sector, and susceptible to economic shocks and to prevent damage from excessive NGOs. It will ensure tourism business global events. Recently, tourism visitor numbers. owners (i) understand the laws businesses and the overall economy and guidance related to protecting suffered significantly from the effects • Developing site management the environment, cultural/historic of the global coronavirus pandemic. plans for sites frequented by heritage, and people, (ii) have Although the industry has not yet tourists (if not already included in access to advice and assistance recovered, it has shown resilience, a PAN management plan). These for compliance, and (iii) are held supported by government interventions plans should be based on defined accountable through enforced such as loans provided under the carrying capacities and should penalties when necessary. Coronavirus Relief One-Stop Shop Act specify priorities for sustainable (2021). Another initiative that emerged infrastructure development, visitor • Ensuring the protection of from the COVID-19 crisis to support experience development, and visitor Palauans from potential harm resilience is the establishment of the movement controls. from tourism (e.g., due to Palau Entrepreneurs for Growth. • Ensuring states have best practice unscrupulous behaviors of visitors or business owners), giving special Preparedness for future at-risk events plans for sustainable tourism attention to the risks posed to will be critical so that the government development via their master children and women. and business owners are ready to plans or dedicated tourism plans, respond with suitable measures. This with guidance from BOT and • Defining tourism sustainability may require closer collaboration with PVA alongside PAN and indicators for Palau and establishing the National Emergency Management development partners. a partnership-based program for Office (NEMO) and other agencies to • Determining the destination implementation, monitoring, and identify how public and private tourism carrying capacity for Palau based reporting. Key partners in such operators can enhance their resilience on a range of factors, including programs include BOT and PVA, to the impacts of such events. waste management and food supply. relevant national agencies such as For food supply, the availability the Bureau of Environment (BOE) of producers and retailers to and EQPB, the states, and NGOs. provide food and other necessities at uninflated prices should be considered. It also requires 53 This project is being led by the Office of Climate Change under the Office of the President. It involves close collaboration with BOT, PVA, and key stakeholders to identify climate-specific strategies for the tourism sector. 52 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis 4.9. Tourism Governance and Stakeholder Collaboration Tourism Governance Structures The formal governance arrangements for the tourism sector in Palau include the following entities: • Ministry of Human Resources, Culture, Tourism and Development. Formed in 2021 under Executive Order 451, it provides government direction on tourism policy and budget via the Bureau of Tourism. • Bureau of Tourism. Established as a government office under Executive Order 451, its goal is to support the master plan for tourism outlined in the PDP and to lead the development of strategy for the sector. It is (vi) connecting government and investment (FIB), aviation (BOAV), human also responsible for regulatory the private sector on tourism resources (BHR), the environment frameworks for the tourism industry matters, and (vii) (BOE, PAN, and EQPB), culture and industry, including developing and promulgating regulations to heritage (BCHP), immigration (BCBP), implementing a code of practice carry out the provisions of the Act. communication (BOC, PNCC), climate for the tourism sector and ensuring change (OCC), health (BPH), and all adherence to sound principles and • State government administrations. forms of infrastructure and services practices of sustainable tourism. While the appointed office or (BPW and PPUC). These agencies have individual(s) for directing tourism a role in tourism governance even • Palau Visitors Authority. Established decisions may vary across states, though their duties and responsibilities as a public corporation under state governments in Palau play may not specify it. the Tourism Reorganization Act a key role in tourism governance (1982), which provides for a Board Further to the public institutional arrangements due to their of Directors with at least three arrangements for tourism, the Palau ownership of assets and decision- tour operator representatives. Its Chamber of Commerce represents making powers. mandate covers (i) promoting Palau the interests of business owners to attract visitors, (ii) implementing Palau also has a Senate Committee (currently 22) in discussions with the then tourism policy and plans on Tourism, Environment and Maritime the government, thereby serving an (and advising on the same in the and a House of Delegates Committee important role in influencing policy future), (iii) encouraging foreign on Tourism and Aviation, both of which decisions.54 The establishment of the investment in tourism, (iv) providing enable the passing of tourism-related Palau Entrepreneurs for Growth in 2021 recommendations on tourism legislation. has a similar role with a focus on local matters related to immigration MSMEs. Finally, the tourism-related and customs as well as community Palau has several national government interests of the wider community engagement, (v) promoting the agencies or state-owned enterprises are represented by their government production of local handicrafts and with mandates that impact tourism. representatives or NGOs. artifacts that meet quality standards, These include agencies responsible for 54 The previous industry body named the Belau Tourism Association merged into PCOC as a Tourism Committee a few years ago. Palau Sustainable Tourism Strategy 2025–2028 53

4. Country-Level Tourism Situation Analysis Tourism Stakeholder • MHRCTD/PVA/BOT discussions Prevailing Issues in Communication and with the private sector conducted Tourism Governance on an ad hoc and informal basis Collaboration and Coordination through meetings with PCOC or The multifaceted nature of tourism via individual meetings. The following shortcomings in Palau’s requires suitable mechanisms for state– tourism governance arrangements and national coordination, cross-agency • MHRCTD/PVA/BOT discussions with coordination mechanisms have been coordination, and public–private– international or local development identified as limiting the potential for community coordination to ensure that partners working in tourism (e.g., sustainable destination management. planning and implementation across all ADB, Sasakawa Peace Foundation, relevant stakeholders are aligned. The FPNMS, PCS) on an as-needed or • Gaps and overlaps in the duties and prevailing mechanisms for such tourism project-specific basis. responsibilities of PVA and BOT, which coordination in Palau include serve as the lead tourism agencies. Currently, there are no avenues › Gaps include duties and • MHRCTD/PVA/BOT discussions with for PVA and BOT to communicate responsibilities related to the states on tourism development regularly with host communities information/data management, priorities via (i) one-on-one meetings on tourism matters. However, the destination monitoring, and on an as-needed basis, and (ii) MHRCTD’s recent Tourism Sentiment investment facilitation. These tabling matters for the Governors Survey, which canvassed views for gaps can be partially attributed to Association meetings for group this strategy, was an important step the PVA Act being 40 years old, discussion. forward in nationally led community which does not account for the engagement. For in-depth discussions evolving nature of tourism and • MHRCTD/PVA/BOT discussions about tourism at the community level, the duties and responsibilities of with other national agencies whose the states provide opportunities for contemporary national tourism mandates include tourism conducted open dialogue with their constituents offices, while the BOT was on an as-needed basis. These on various matters, including tourism. established more recently but discussions are most frequent with NGOs also play an important role in has a limited mandate. agencies under MHRCTD, as well as representing the interests of some FIB, EQPB, and the Palau National communities. Public comments on › Overlaps include matters of Communications Corporation (PNCC). specific tourism developments are tourism planning and development enabled through public hearings at the sector level and concerning and/or town hall meetings. specific sites/products, with a lack of delineation between BOT and PVA duties and responsibilities. • Confusion among stakeholders about the roles of PVA and BOT, contributing to industry discontent about performance. This confusion arises from the aforementioned gaps and overlaps, compounded by a lack of communication within the industry. • Lack of clarity regarding the tourism-related mandates of other government agencies that do (or should) have a role in leading or supporting certain tourism functions. Additionally, there is a lack of coordination among agencies on tourism-related matters (e.g., aviation development, investment facilitation). 54 Palau Sustainable Tourism Strategy 2025–2028

4. Country-Level Tourism Situation Analysis • Insufficient resources for BOT • Insufficient information management representatives from non-tourism to fulfill its mandate. systems and processes for tourism agencies would not have the time, to enable communication and interest, or mandate to participate. • Challenges in national–state collaboration among partners. collaboration and coordination Reasons cited for why the STCs did in tourism (although progress These issues are not new, and not eventuate include (i) the lack of a has been made in strengthening the RTPF recognized the need to financing mechanism (like that provided some relationships since the strengthen tourism governance by the PAN Fund), (ii) the lack of people RTPF and through the recent and coordination. It proposed the resources in many states, and (iii) the STS consultations). establishment of a National Tourism existence of related, but competing Coordination Board (NTCB) and State state planning mechanisms (e.g., state • Lack of regular, structured Tourism Councils (STCs); however, planning commissions or equivalent platforms for public–private– these did not eventuate. working groups for master plans). community dialogue on tourism matters, limiting Palau from Reasons cited for why the NTCB failed Although the NTCB and STCs were realizing its potential for a to materialize include (i) uncertainty not established, the need for solutions sustainable, nationwide about how to establish it (including its to improve tourism governance and tourism sector. legal mandate, funding sources, and coordination remains. Hence, this dealing with overlapping responsibilities strategy proposes priorities that • Lack of broad private sector with PVA and BOT), (ii) concerns that it are informed by recent stakeholder engagement with PCOC and/or would require more time than private consultations. PEFG, and the lack of alignment sector representatives could commit, between the two. and (iii) concerns that public sector Palau Sustainable Tourism Strategy 2025–2028 55

5. Objectives, Priorities and Activities 2025–2028 This section presents the direction for Palau’s It details Sustainable Tourism Strategy 2025–2028, • 14 outcome-level objectives to be pursued through informed by the consultation and research the strategy. These support the strategy’s defined goals, uphold its guiding principles, and ultimately contribute findings summarized in the preceding sections: to the long-term vision for tourism in Palau. State-Based Destination Assessments (Section 3) • 65 strategic priorities to be progressed over the next and Country-Level Tourism Situation Analysis four years to achieve each of the objectives, each with (Section 4). suggested activities. • The top 10 priorities for Year 1. 5.1. Objectives The objectives are clustered into four themes, with 14 specific outcome-level objectives. The 14 objectives outlined in this strategy will be progressed through the implementation of the following strategic priorities and corresponding activities. The strategic priorities will serve as outcome-level performance indicators to be evaluated at the end of the strategy, while the activities will serve as annual output-level performance indicators. 4 Objective Themes 14 Outcome-Level Objectives Destination Establishing tourism governance structures and coordination mechanisms that enable effective 1. Management leadership and multi-stakeholder collaboration in sustainable destination management. Structures and Strengthening research and information management systems that support evidence-based 2. sustainable destination managment. Systems

3. Providing accommodation that meets the expectations of high-value tourists and authentically represents Palau.

4. Delivering a variety of sustainably managed, world-class marine visitor experiences that are valued by residents and tourists alike. Tourism Supply: Growing the supply of sustainably managed terrestrial visitor experiences based around Palau's Products, People, 5. natural and cultural attributes. Access and Building a skilled tourism workforce that meets industry needs and provides decent work 6. opportunities for interested Palauans. Infrastructure

7. Providing internationally competitive transport infrastructure and services that make Palau, and its tourism-ready locations, accessible to target markets. Progressing sustainable and resilient tourism-enabling public infrastructure and services that 8. support both visitors and residents. Managing appropriate controls, advice, and monitoring mechanisms that ensure tourism 9. development in Palau is environmentally, culturally, and socially sustainable. Supporting Conditions for 10. Creating a business environment that enables micro, SME, and large private sector investment in sustainable and resilient tourism ventures. Sustainable Tourism Sector 11. Developing linkages between tourism and other sectors that deliver community benefits without community burdens. Development

12. Fostering a tourism-aware community that ensures visitors feel welcome and safe, and residents feel respected and safe. Destination 13. Managing a destination brand that represents Palau and presents a compelling proposition to high-value, low-impact travelers. Marketing and Distribution 14. Undertaking evidence-based marketing activity that serves to convert high-value, low-impact traveler interest to bookings. 56 Palau Sustainable Tourism Strategy 2025–2028

5. Objectives, Priorities and Activities 2025–2028 5.2. Priorities & Activities Theme 1: Destination Management Structures and Systems OBJECTIVE 1: Establishing tourism governance structures and coordination mechanisms that enable effective leadership and multi-stakeholder collaboration in sustainable destination management. STRATEGIC PRIORITIES AND ACTIVITIES 1A Ratify a national–state whole of government commitment to tourism as a priority sustainable economic sector for Palau. 2025 i) Secure state government support for a whole of government commitment to tourism as a priority sustainable economic sector for Palau. To be formalized via the launch of the STS and Destination Management Partnership (1B). ii) Secure presidential and congressional support for a whole of government commitment to tourism as a priority sustainable economic sector for Palau. To be presented as a formal declaration. iii) Engage all public agencies with responsibilities impacting tourism to demonstrate support by a) endorsing the STS and Destination Management Partnership (1B); b) committing to join meetings as required to progress the STS and evolving tourism priorities; and c) participating in a review of destination management functions to identify ways to improve the governance of the sector (1C). Co-leads: Office of the President and MHRCTD. Partners: All national ministries/offices and state governments. 1B Form a Destination Management Partnership Steering Committee (DMPSC)—a cross-agency, national–subnational, and public–private–community representative task force—to facilitate the multi-stakeholder coordination required to implement and monitor the STS. 2025 i) Prepare terms of reference for the DMPSC, detailing governance arrangements, composition,55 responsibilities, meeting frequency, and mechanisms for implementation, monitoring, and reporting. (To optimize engagement by key stakeholders but avoid excessive demands on their time.) ii) Mobilize the DMPSC with the commitment of nominated members to fulfill their obligations as representatives of partner agencies/groups. (Aim to launch at the same time as the STS.) iii) Meet frequently (e.g., quarterly) according to a rolling agenda based around STS objectives and emerging priorities, and undertake a progress review at the end of year 1.56 iv) Establish technical working groups to progress discussions or action on specific topics. 2026–2027 i) Continue DMPSC and working group meetings and annual progress reviews as above. 2028 i) Continue DMPSC and working group meetings and annual progress reviews as above. Lead: MHRCTD. Partners: BOT; PVA; BOAV; BOENV; BHR; FIB; states (Governors Association); representatives of the private sector, NGOs, communities; and other agencies on a topic-specific basis. 1C Reorganize the national institutional arrangements for tourism to ensure a more efficient and effective performance across contemporary destination management functions. 2025 i) Undertake a review of destination management functions in Palau to identify gaps and overlaps 57 a) in the mandates and current activities of BOT and PVA; and b) with other national agencies that have a role in sustainable destination management. ii) Identify future institutional arrangements best suited to sustainable destination management in Palau, including a) tourism-specific institutions (currently PVA and BOT); and b) tourism-supporting institutions. To propose the powers, functions, and budget/resources required for those arrangements. iii) Progress reforms to PVA and BOT as agreed based on the above evidence, including clarifying mandates and revising regulations if necessary. 2026 i) Progress reforms to tourism-supporting institutions as agreed based on the above evidence, including clarifying mandates and revising regulations if necessary. 2027–2028 i) Continue above as necessary. Lead: MHRCTD. Partners: PVA, BOT, and all agencies with tourism-related responsibilities. 55 Proposed composition: Directors of lead agencies listed above plus representatives of the Governors Association, private sector, NGOs, and community groups. To invite Directors from other offices when relevant topics are on the agenda (e.g., BPH, BCBP, BPW, OCC PPUC, EQPB). To be chaired by the Minister for Tourism with BOT to serve as secretariat. 56 STS activities to serve as output-level KPIs, and priorities to serve as outcome-level KPIs. 57 A framework for assessing destination management functions is available from PSDI. Palau Sustainable Tourism Strategy 2025–2028 57

5. Objectives, Priorities and Activities 2025–2028 1D Formalize a tourism development support program (TDSP) for states to access resources for developing and mobilizing their tourism plans/priorities. 2025 i) Design a program that enhances and integrates existing BOT and PVA efforts to help the states by a) providing technical support for the development of states’ tourism/ecotourism plans; b) providing (or facilitating) advice and training on accommodation and product development to state officers and the businesses and communities they represent (3C, 4B, 5B, 10B); c) delivering (or facilitating) funding for the states to develop or improve sites/products/small-scale public infrastructure for tourism; and d) providing marketing and distribution support (14A, 14B). ii) Establish the criteria for allocating the above support to ensure transparency and the best use of limited resources. Criteria to be based on (a) state interest and development readiness factors, and (b) prioritization of sites via a registry (4A, 5A). iii) Work with MOF and funding partners to source funding for the program. 2026–2028 i) Roll out and scale up the TDSP to reach more states and their beneficiaries each year. Co-leads: PVA, BOT, and interested states. Partners: Training/advisory partners (to be convened, e.g., Palau SBDC, PEFG, PCOC, FPNMS, national government bureaus for relevant themes), and MOF (for funding) 1E Formalize arrangements for national and state government communication on tourism priorities, using existing structures where possible. 2025–2028 i) Schedule and conduct regular high-level tourism discussions among BOT, PVA, and the states via meetings with the Governors Association and Council of Chiefs, where possible. ii) Undertake regular one-to-one meetings between BOT/PVA and each state government to progress agreed tourism priorities and programs of work. Co-leads: PVA, BOT, and interested states. 1F Define and promote public–private–community dialogue (PPCD) mechanisms for tourism to ensure all accountable and interested stakeholders can be involved in discussions if they wish. 2025 i) Establish or update MOUs between MHRCTD/BOT/PVA and Palau’s tourism private sector representative organizations PCOC and PEFG to reaffirm commitment to tourism private sector representation in regular high-level discussions on tourism priorities. ii) Launch an annual tourism business survey to gather data on industry trends and needs. iii) Continue and enhance PVA/BOT written communications (e.g., newsletters, corporate website) and face-to-face engagement (e.g., annual tourism summit) to provide industry partners with key tourism information (2B, 2C) and give the opportunity to ask questions and share views on tourism. iv) Defer to the states as the (a) primary convener for public, private, and community stakeholder interests in tourism at state-level, and (b) representative of those interests to national platforms (1E).58 v) Undertake a nationwide tourism sentiment survey at least every two years to provide residents the opportunity to share views on tourism. 2026–2028 i) Strengthen and scale up activities (i)–(v) above each year. ii) Launch Palau Tourism Awards as a special event to bring the industry together. Co-leads: PVA, BOT, and interested states. Partners: Private sector organizations and operators, and community members. 58 This allows tourism information and views to be shared with and collected from the states’ constituents in accordance with their respective preferences for PPCD. However, if the states seek support with PPCD, this should be provided by BOT/PVA. 58 Palau Sustainable Tourism Strategy 2025–2028

5. Objectives, Priorities and Activities 2025–2028 OBJECTIVE 2: Strengthening research and information management systems that support evidence-based sustainable destination management. STRATEGIC PRIORITIES AND ACTIVITIES 2A Design, develop, and maintain a destination information management system for sourcing, storing, and utilizing destination management data. 2025 i) Conduct an audit of data available for informing destination management, i.e., demand statistics (2B, 2C), supply information (2D, 3D, 4A, 5A), tourism investment data (3E, 10F), workforce data (2E, 6A), environmental/social impacts data (9E), and economic impacts data (E9E). The audit is to identify a) data type, sources, storage locations and format, data ownership/responsibility for updating, and uses for analysis and reporting; b) gaps in data relevant to informing destination management for Palau; and c) challenges, needs, and opportunities for improving data sourcing, storage, and utilization. ii) Engage information management experts to design a destination information management system (DIMS) to store all destination management data. (One platform, if possible, or multiple platforms, if necessary, to serve different purposes, requiring different ownership and/or different formats and software solutions.) 2026 i) Develop and launch the DIMS, with assigned ownership, security provisions, operating procedures, and roles and responsibilities for data sourcing, analysis, and utilization. 2027–2028 i) Maintain the DIMS with regular data updates. ii) Engage technical experts to explore options to transition from a DIMS that records supply data to one with functions for live updates, bookings, and site-specific capacity monitoring functions. Co-leads: BOT and PVA. Partners: NGOs, MOF, FIB, BHR, and BOE. 2B Strengthen the collection, analysis, and reporting of data and insights on arrival trends and travel behaviors of visitors to Palau. 2025 i) Ensure all current/potential sources of visitor data are part of the proposed data audit (2A). ii) Streamline and expedite the process of sharing visitor arrival data with PVA for tourism purposes (from immigration arrival cards, including health declaration forms). iii) Launch an International Visitors Survey (IVS) to be conducted on an ongoing basis. iv) Establish a process and schedule for analyzing visitor data, preparing reports, and sharing via industry communication channels (1F). v) Apply all visitor data in the development of brand and marketing strategies (13A, 14A). 2026–2028 i) Continue and enhance the above activities (ii)–(v) as relevant each year. Lead: PVA. Partners: BOT, BPH, and BCBP. 2C Strengthen the sourcing and interpretation of market research on global tourism trends and insights relevant to Palau and share it with local tourism stakeholders. 2025 i) Ensure all current/potential sources of relevant market research on global and regional travel and tourism trends and sustainable tourism practices are part of the proposed data audit (2A). ii) Establish roles and responsibilities and a schedule for monitoring market research, interpreting relevant insights for Palau’s tourism stakeholders, and sharing key information via industry communication channels (1F). 2026–2028 i) Continue and enhance the above activities as relevant each year. Lead: PVA. Partners: BOT. 2D Strengthen the collection, analysis, reporting, and use of Palau tourism supply data. 2025 i) Ensure the supply data below is part of the proposed data audit for informing the design of a DIMS (2A). ii) Establish a central, electronic, up-to-date, comprehensive accommodation database as part of the DIMS to support more efficient data analysis and reporting, improve communication with businesses, and serve marketing purposes. To advance PVA’s current spreadsheet records and streamline data sourcing to minimize manual data checking/updating for each of the following supply themes. a) Accommodation: to include tags by type, location, price point, number of rooms and beds, ownership, contact person(s) and details, operating status (closed, open, under construction, planned), and—in the future—standards certification identifiers. b) Tourism sites/attractions: to include tags by type, status (e.g., open to visitors vs. potential), attributes (e.g., environmental, cultural, or historical), location, fees (if relevant), ownership status (e.g., state vs. private), contact, operating hours, market-readiness identifiers, and—in the future—carrying capacities. c) Tour operators, boat operators, and tour guides in Palau: to include tags by type, location, ownership status (e.g., state vs. private), contact, operating hours, market-readiness identifiers, and – in the future – standards certification identifiers. Palau Sustainable Tourism Strategy 2025–2028 59

5. Objectives, Priorities and Activities 2025–2028 2026–2028 i) Extend the database to include gaps for each supply type based on research (3D, 4A, 5A). ii) Extend the database to include other tourism services, e.g., retail and restaurants catering to tourists. iii) Continue and enhance the above activities as relevant each year. Lead: PVA and BOT. Partners: States, FIB, and private sector organizations. 2E Strengthen the collection, analysis, and reporting of tourism workforce and skills data. 2025 i) Ensure workforce data is part of the proposed data audit for informing the design of a DIMS (2A). (Refer to Objective 6 for data management activities related to workforce.) Lead: BOT and PVA. Partners: BHR, Palau SBDC, WIOA, and private sector organizations. 2F Establish a program for collecting, analyzing, and reporting sustainable destination monitoring data to track the positive and negative impacts of tourism. 2025 i) Ensure sustainable destination monitoring data is part of the proposed data audit for informing the design of a DIMS (2A). (Refer to Objective 9 for data management activities related to sustainable destination monitoring). Lead: BOT Partners: PVA, states, MOF, MPII, BOE, and NGOs. 60 Palau Sustainable Tourism Strategy 2025–2028

5. Objectives, Priorities and Activities 2025–2028 5.3. Priorities and Activities Theme 2: Tourism Supply – Products, People, Access, Infrastructure OBJECTIVE 3: Providing accommodation that meets the expectations of high-value tourists and authentically represents Palau. STRATEGIC PRIORITIES AND ACTIVITIES 3A Design and launch an accommodation minimum standards program to ensure only those meeting minimum requirements for quality, safety, and sustainability can operate. 2025 i) Determine minimum standards that must be met by different accommodation types. To feature quality, safety, and sustainability measures covering facilities and services. These should a) align with existing regulations (e.g., food health and safety and environmental protection) and future regulations (e.g., building code); and b) consider standards set by international brands already in Palau and other examples of international best practices that can be contextualized for Palau. ii) Design an accommodation minimum standards program based on the above. To identify a) how it will be served by Accommodation Regulations (in draft) and linked to the issuing of a license to operate); b) how it will be operationalized (e.g., resources needed to start and roll out over time, prioritization by type, inspection process); c) how compliance will be supported and incentivized or enforced with non-compliance penalties; and d) how it will link with a certification program for higher quality benchmarks (3B). iii) Enact the Accommodation Regulations to provide regulatory powers for administering standards. 2026 i) Roll out the minimum standards program with MOUs between partners responsible for/contributing to various aspects of safety, sustainability, and accessibility. Commence with the highest priority types. ii) Help accommodation providers achieve minimum standards with advice and direction, including through the proposed accommodation enhancement initiative (3C). 2027–2028 i) Continue the above, scaling up the program to reach more accommodation providers each year. Lead: BOT. Partners: States, BPW, EQPB, PPUC, PVA, MOF, BPH, FPNMS. 3B Launch an accommodation quality assurance certification program to recognize establishments that meet higher quality benchmarks (over and above minimum standards). 2025 i) Determine quality benchmarks for accommodation facilities and services that providers can receive recognition for under a quality assurance certification. To be structured to suit different types of accommodation and consider supplementary quality measures (e.g., sustainable practices and accessibility). To draw on international examples of best practices, contextualized for Palau. ii) Design a quality assurance certification program based on the above. To consider a) how, as a voluntary program, it will align with the compulsory minimum standards scheme; and b) how the certification will be represented (e.g., Palau equivalent of a star rating). 2026–2028 i) Roll out the program and help accommodation providers to achieve quality assurance certification through the accommodation enhancement initiative (3C). ii) Include accommodation categories in the Palau Tourism Awards, with the criteria including sustainability practices and representation of Palauan culture/style. Lead: BOT and PVA. Partners: States, BPW, EQPB, PPUC, PVA, MOF, BPH, FPNMS 3C Develop an accommodation enhancement initiative to support qualifying local business owners to access the technical advice and funds needed to improve or grow their business. 2025 i) Design packages of advice, training, and other support for accommodation providers to meet common needs, such as those related to a) improving market readiness, including advice on improving facilities, services, and the overall visitor experience (and, in the future, meeting minimum standards and achieving quality benchmarks); b) strengthening owners’ business and technical skills to start/improve their business (10B); c) strengthening owners’ capabilities to apply for finance to start/improve their business (10C); d) adopting sustainable and resilient business practices and new technologies; and e) improving marketing and distribution, including digital transformation. To align with the TDSP (1D) and be tailored to different levels and types of support needed.59 ii) Determine how the program will be operationalized, including funding, staff resourcing, delivery options, arrangements with delivery partners, participant selection, and contribution requirements. iii) Work with MOF and funding partners to source funding for this and related initiatives. 59 This reorganizes some activities that are already in place to ensure more efficient use of resources and more effective outcomes. It will identify what BOT/PVA are best placed to deliver versus what partners can deliver based on respective areas of expertise (e.g., government agencies, Palau SBDC, PEFG, PCOC, local and international NGOs). Palau Sustainable Tourism Strategy 2025–2028 61

5. Objectives, Priorities and Activities 2025–2028 2026–2028 i) Roll out the above initiative with states under the TDSP (1D) and delivery partners. ii) Explore options with financial institutions and funding partners to design loan products or grants that support accommodation enhancement for businesses meeting set criteria (10C). iii) Promote the program and run workshops/individual sessions for qualifying businesses. Co-leads: BOT and PVA. Partners: States, Palau SBDC, PEFG, MOF, NGOs, PCOC, BOD, and financial institutions. 3D Develop and maintain a list of tourism accommodation priorities for Palau to identify needs for new and improved supply, by type, scale, and location. 2026 i) Undertake an accommodation supply and demand gap analysis annually using quantitative and qualitative data sources (2B, 2C, 2D) to determine the needs for improved and new accommodation. ii) Identify existing accommodation establishments that do not meet minimum standards or align with Palau’s market position for high-value sustainable tourism. Collaborate with owners to improve their property via the accommodation enhancement initiative (3C). iii) Define the type and size of new accommodation required in Palau to meet projected future gaps (i.e., high-priority accommodation investments). 2028 i) Redo an accommodation supply and demand gap analysis to understand emerging needs. Co-leads: PVA and BOT. 3E Progress opportunities for future investment in new accommodation supply where there is evidence of demand gaps and interest from the states, landowners, and investors. 2025 i) Map out all tourism activity zones in Palau in collaboration with interested states and upon endorsement of all state master plans. ii) Identify sites suitable for accommodation investment in terms of tourism appeal and land title. 2026–2028 i) Develop profiles for accommodation investment opportunities by examining successful examples from similar countries and drawing on the knowledge and skills of landowners, states, PVA, FIB, and BOD. ii) Promote these profiles to target investors via targeted channels when the time is right (10F). Co-leads: PVA, BOT, and interested states. Partners: States, Palau SBDC, PEFG, MOF, NGOs, PCOC, BOD, and financial institutions. OBJECTIVE 4: Delivering a variety of sustainably managed, world-class marine visitor experiences that are valued by residents and tourists alike. STRATEGIC PRIORITIES AND ACTIVITIES 4A Establish and maintain a register of product and experience development priorities for Palau’s current and prospective marine tourism sites. 2025 i) Establish the proposed database of tourism sites/attractions as part of a DIMS (2D) and use it as the foundation for a register to prioritize marine-based product and experience development needs. ii) Identify priorities for improving existing marine attractions in the register. To draw on information currently captured in state master plans, PAN plans, PVA work, and other insights. To consider priorities for a) improving small-scale infrastructure (e.g., moorings, jetties, staff amenities, safety measures, and signage); b) improving customer service/visitor experience delivery; c) determining carrying capacities and visitor flow solutions for high-traffic sites (9B); d) improving sustainable tourism practices at the sites; e) improving commercial management (revenues, pricing, marketing, and reinvesting funds); and f) meeting minimum standards/quality benchmarks not covered above. iii) Schedule priorities for a product and experience enhancement initiative (4B). 2026–2028 i) Continue the above, updating the register on an ongoing basis. ii) Identify opportunities for opening up new marine sites where a) state, private, and/or community stakeholders propose a site(s) suitable for marine tourism; b) the proposal suits market demand insights from IVS and market trends (2A, 2B) and identified supply gaps (2D); and c) the site is accessible for tourism purposes. iii) In doing so, identify priorities according to considerations described under (ii) above. Lead: BOT. Partners: PVA, states, PAN, BOE, and NGOs. 62 Palau Sustainable Tourism Strategy 2025–2028

5. Objectives, Priorities and Activities 2025–2028 4B Develop a product and experience enhancement initiative that provides tailored support to state governments, landowners, and business/community interests seeking to improve or start a marine tourism attraction/activity. 2025 i) Design a package of advice, training, and support for the states and their marine-based tourism attractions/products to progress priorities identified in the above register (4A). To be integrated with the TDSP and meet common enterprise development support needs such as those related to a) improving market readiness (and, in the future, meeting minimum standards and quality benchmarks). To include advice on improving facilities, services, and overall visitor experience; b) strengthening business skills to start/improve a tourism attraction (10B), including private sector competencies to access commercial finance (10C); c) adopting sustainable and resilient business practices and new technologies; and d) improving marketing and distribution, including digital transformation. To be tailored to different levels and types of support as needed.60 ii) Determine how the program will be operationalized, including funding, staff resourcing, delivery options, arrangements with delivery partners, participant selection (based on the above registry), and contribution requirements. iii) Work with MOF and funding partners to source funding for this initiative. 2026–2028 i) Roll out the above initiative with states under the TDSP (1D) and delivery partners. ii) Explore options with financial institutions and funding partners to design loan products or grants that support accommodation enhancement for businesses meeting set criteria (10C). iii) Promote the program and run workshops/individual sessions for qualifying products. Co-leads: PVA and BOT. Partners: States, MOF, training partners (Palau SBDC, PEFG, PCOC, local/international NGOs), and financial institutions. 4C Grow the pool of certified Palauan tour guides to enable more marine-based visitor experiences to be safely, sustainably, and authentically delivered. 2025–2028 i) Continue the delivery of Koror’s tour guide training and certification program, which enables marine tour/dive guides to develop the skills to deliver safe, sustainable, and culturally appropriate tours. ii) Roll out the national tour guide training and certification program, which achieves the above for guides in all states. iii) Continue the Scuba Dive Master Training program with delivery partners. iv) Finalize and roll out the regulations covering tour guides (Part 5 of the National Tourism Regulations) to ensure only certified tour guides deliver tours, thereby adhering to safety, sustainability, and culturally appropriate benchmarks. Co-leads: BOT, PVA, and Koror State. Partners: States and tour operators. 4D Design and launch a tour operator minimum standards program to ensure only those meeting the minimum requirements for quality, safety, and sustainability can operate marine tours. 2025 i) Determine the minimum requirements that must be met by tour operators offering marine tours. To feature quality, safety, and sustainability measures covering all aspects of operations (e.g., vessels, equipment, use of certified tour guides, standard operating procedures, and service delivery). These should build on/align with a) existing regulations for tour operators; b) practices included in the tour guide training and certification and associated future regulation; c) relevant measures from Green Fins guidance; and d) relevant examples of international best practices (e.g., PADI and GSTC), contextualized for Palau. ii) Design a tour operator minimum standards program based on the above. To identify a) how it will be served by the current tour operator regulations in terms of the powers and functions of BOT, compliance requirements for providers, link to licensing, and any penalties for non-compliance; b) how it will be operationalized (e.g., resources needed to start and roll out over time, prioritization by type, inspection process); and c) how compliance can be supported and incentivized or enforced with non-compliance penalties. 2026–2028 i) Roll out the minimum standards program with MOUs between partners responsible for/contributing to various aspects of safety, sustainability, and accessibility. ii) Help tour operators to achieve minimum standards with advice and direction, including through the proposed product and experience enhancement initiative (4B). 2027–2028 i) Continue the above, scaling up the program to reach more marine attractions/activities each year. Lead: BOT. Partners: PVA, states, tourism operators, FPNMS and other interested NGOs. 60 This reorganizes some product development support that is already in place to ensure a more efficient use of resources and more effective outcomes. It will identify what BOT/PVA are best placed to deliver versus what partners can deliver based on respective areas of expertise (e.g., government agencies, Palau SBDC, PEFG, PCOC, local and international NGOs). Palau Sustainable Tourism Strategy 2025–2028 63

5. Objectives, Priorities and Activities 2025–2028 OBJECTIVE 5: Growing the supply of sustainably managed terrestrial visitor experiences based around Palau’s natural and cultural attributes. STRATEGIC PRIORITIES AND ACTIVITIES 5A Establish and maintain a register of tourism product and experience development priorities for current and potential land- based sites and visitor experiences. 2025 i) Establish the proposed database of tourism sites/attractions as part of a DIMS (2D) and use it as the foundation for a register to prioritize terrestrial product and experience development needs. ii) Identify priorities for improving existing terrestrial attractions in the register. To draw on information currently captured in state master plans, PAN plans, PVA work, and other insights. To consider priorities for a) improving small-scale infrastructure (e.g., access roads, entry booth, shade, paths, toilets, parking, safety measures) and signage (wayfinding and interpretive signs); b) improving customer service/visitor experience delivery; c) determining carrying capacities and visitor flow solutions for high-traffic sites (9B); d) improving sustainable tourism practices at the site; e) improving commercial management (of revenues, pricing, marketing, reinvesting in the site); and f) meeting minimum standards/quality benchmarks not covered above for relevant products. iii) Schedule priorities for a product and experience enhancement initiative (5B). 2026–2028 i) Continue (ii) and (iii) above, updating the register on an ongoing basis. ii) Identify opportunities for opening up new terrestrial sites where a) state, private, and/or community stakeholders propose a site(s) suitable for developing a tourism product based on nature, culture (tangible/intangible), and/or history; b) sites align with market demand evidence (2A, 2B) and identified supply gaps (2D); and c) the product’s location makes sense in terms of participation in the Alii Pass program, complementing a cluster, and state readiness. iii) In doing so, identify priorities according to considerations described under (ii) above. Lead: BOT. Partners: PVA, states, PAN, BOE, and NGOs. 5B Develop a product and experience enhancement initiative that provides tailored support to state governments, landowners, and business/community interests seeking to improve or start a terrestrial tourism attraction/activity. 2025–2028 Same as 4B but tailored for land-based sites. Co-leads: PVA and BOT. Partners: States, MOF, training partners (Palau SBDC, PEFG, PCOC, local/international NGOs), and financial institutions. 5C Grow the pool of certified Palauan tour guides to enable more land-based visitor experiences to be safely, sustainably, and authentically delivered. 2025–2028 i) Continue the delivery of Koror’s tour guide training and certification program, which enables tour guides to develop skills to deliver safe, sustainable, and culturally appropriate tours. ii) Roll out the national tour guide training and certification program, which achieves the above for guides in all states. iii) Finalize and roll out the regulations covering tour guides (Part 5 of the National Tourism Regulations) to ensure only certified tour guides deliver tours, thereby adhering to safety, sustainability, and culturally appropriate benchmarks. Co-leads: BOT, PVA, and Koror State. Partners: States and tour operators. 5D Design and roll out a tour operator minimum standards program to ensure only those meeting the minimum requirements for quality, safety, and sustainability can operate land tours. 2025 i) Determine the minimum requirements that must be met by tour operators offering land tours. To feature quality, safety, and sustainability measures covering all aspects of operations (e.g., vehicles, equipment, use of certified tour guides, standard operating procedures, and service delivery). These should build on/align with a) existing regulations for tour operators; b) practices included in the tour guide training and certification and associated future regulation; c) relevant measures from Green Boots guidance; and d) relevant examples from international best practices (e.g., Global Sustainable Tourism Council), contextualized for Palau. ii) Design a tour operator minimum standards program (4D(iii)). 2026–2028 Same as 4D. Lead: BOT. Partners: PVA, states, tourism operators, FPNMS, and other interested NGOs. 64 Palau Sustainable Tourism Strategy 2025–2028

5. Objectives, Priorities and Activities 2025–2028 OBJECTIVE 6: Building a skilled tourism workforce that meets industry needs and provides decent work opportunities for interested Palauans. STRATEGIC PRIORITIES AND ACTIVITIES 6A Map and track tourism and hospitality skills gaps, training needs, and foreign workforce needs. 2025 i) Include questions in the proposed tourism business survey (1F) to identify current and future workforce needs. To align with the BHR/ILO project to seek detailed insights on a) the nature and scale of tourism and hospitality skills gaps; b) views on the suitability of current tourism and hospitality training (curriculum and delivery modes); c) views on skills development/workforce programs to enable more local employment; and d) views on enabling employment of overseas workers when there is a local skilled worker shortage. ii) Undertake research among current tourism workers to identify a) motivating factors for working in tourism and hospitality; b) views on barriers to/concerns about working in the sector; and c) self-identified training needs. To align with the BHR/ILO project and leverage the proposed community sentiment survey (12A). To analyze results by age groups and gender. iii) Undertake research of prospective students (young and mature) to identify motivating factors for working in tourism and hospitality and preferences for training (e.g., modes of delivery). (Align with the BHR/ILO project.) iv) Track tourism employment data via USGS workforce data analysis. To make data available on tourism jobs (number and value) annually, with categorization by foreign/local workers, job types, public/private sector, part-time/full-time, and permanent/temporary (2E). 2026–2028 i) Repeat the above surveys and analysis annually to support workforce planning. Co-leads: BHR, BOT, and PVA. Partners: ILO, PCC, PCOC, PEFG, and SHRM. 6B Conduct community awareness initiatives promoting tourism as a career choice for Palauans. 2025 i) Design and roll out a public awareness campaign about tourism that includes the promotion of different types of tourism jobs. To include testimonials from Palauan workers and employers. To align with broader community awareness campaigns about tourism (12A). 2026–2028 i) Continue public awareness campaigns about tourism and hospitality careers on an ongoing basis. Co-leads: PVA and BHR. Partners: BOT, PCOC, PEFG, PCC. 6C Strengthen tourism and hospitality training and workplace placement programs to deliver the skills needed by businesses using delivery modes that suit prospective students. 2025 i) Analyze findings from the above research (6A) and explore contemporary tourism and hospitality training programs in similar contexts to identify priorities for changes in Palau. 2026–2028 i) Revise the PCC tourism and hospitality curriculum and delivery modes in accordance with the findings. ii) Invest in updating tourism and hospitality facilities and resources as needed to deliver the revised curriculum. iii) Design workforce placement programs that meet current and future needs by expanding public–private partnerships to drive local recruitment in the sector. Co-leads: BHR and BOT. Partners: PCC, BSO, BCI, PVA, PCOC, PEFG, and WIOA. 6D Strengthen tourism and hospitality content in Palau’s elementary and high school curriculum. 2025 i) Progress dialogue among tourism agencies, the Bureau of Curriculum and Instruction (BCI), and the private sector to expand the inclusion of tourism-related content in the curriculum for elementary and high school students. 2026 i) Design a program to develop the curriculum, train teachers, and roll out subjects/activities. 2027–2028 i) Fund and continue to implement/expand the activities above. Co-leads: BCI, PVA, BOT, and BHR. Partners: PEFG and PCOC. 6E Design policies and programs to address workforce gaps during periods of local shortages. 2026 i) Apply findings from the tourism business survey (1F) to revise or introduce policies that a) encourage businesses to employ local workers (e.g., incentivizing on-the-job training for them); and b) make it easier for businesses to employ foreign workers where needed (e.g., temporarily revising the 5-year moratorium on foreign tour guides that prevents them from changing employers). ii) Ensure all public awareness activities promote the benefits of having both local and foreign workers. Palau Sustainable Tourism Strategy 2025–2028 65

5. Objectives, Priorities and Activities 2025–2028 2027–2028 i) Continue the above activities as relevant. Co-leads: BHR and BOT. Partners: Immigration, MOF, and PVA. 6F Continue to provide safe and fair working conditions for tourism workers in Palau. 2025 i) Analyze findings from the above research (6A) and other anecdotal reports to identify issues related to working conditions for tourism workers in Palau. 2026–2028 i) Design reforms to address any identified issues. Co-leads: BHR, BOT, and PVA. Partners: OLC and ILO. OBJECTIVE 7: Providing internationally competitive transport infrastructure and services that make Palau, and its tourism-ready locations, accessible to target markets. STRATEGIC PRIORITIES AND ACTIVITIES 7A Progress a strategic approach to air route development to secure frequent, reliable, and sustained international air services to Palau, with reputable carriers servicing target markets. 2025 i) Prepare a strategic plan to develop air routes that serve Palau and its target tourism and commercial markets. To be prepared by BOAV, PIAC, and PVA to leverage their respective expertise and identify their respective roles and responsibilities. In doing so, consider the recommendations of the 2024 Aviation Feasibility Study to61 a) attend the Routes World conference to build aviation networks and commercial partnerships; and b) prepare the Airline Business Development Strategy and the annual Airline Marketing Strategy. 2026 i) Roll out the business development priorities outlined in the above strategy and plan for destination promotion and air services negotiation via targeted channels. ii) Undertake cooperative marketing with partner airlines to generate sufficient trade and consumer demand to sustain services (via PVA-led destination marketing; 14B). 2027–2028 i) Review the outcomes before deciding to continue with the above activities or revise the plans based on evolving conditions. Co-leads: MPII/BOAV and PIAC. Partners: PVA. 7B Invest in airport infrastructure that serves tourism, trade, and residents’ travel needs 2025–2028 i) Strengthen and maintain collaboration among agencies responsible for tourism, aviation, and infrastructure to ensure that planning for airport infrastructure investment (a) considers demand growth scenarios, and (b) informs the setting of realistic growth targets. ii) Progress the airport infrastructure priorities identified in the PDP for a) Palau International Airport, including expanding airport facilities, maintaining existing runway and taxiways, and investing in equipment/small-scale infrastructure; and b) the airfields in Peleliu and Angaur. iii) Consider the technical, social, economic, and sustainability project recommendations proposed in the 2024 Palau Aviation Feasibility Study. Prioritize initiatives in future national infrastructure plans. Co-leads: MPII/BOAV and PIAC. Partners: BOT, PVA, and BPW. 7C Invest in tourism-enabling road transport infrastructure and services that also serve local needs. 2025–2028 i) Strengthen and maintain collaboration among agencies responsible for tourism and road infrastructure to ensure planning for road infrastructure investment (a) considers demand growth scenarios, and (b) informs the setting of realistic growth targets. ii) Progress the tourism-enabling road transport infrastructure priorities identified in the KBRUDSAP 2020–2030, the NIIP 2021–2030, and the state master plans. iii) Identify high-priority infrastructure projects, e.g., improved or new access roads to existing or high-potential tourism sites, as well as sidewalks, crossings, and lighting to improve pedestrian access and safety in areas with high foot traffic from tourists/locals. To entail a) developing and maintaining a register of site-specific needs; b) determining the extent of public good (public use and/or economic benefit); and c) tabling a list of priorities for future investment planning exercises at the DMPSC and/or where suitable to attract necessary funding/investment. Co-leads: BOT, PVA, and BPW DCIP. 61 Australian Department of Trade and Foreign Affairs (DFAT). 2024. Aviation Feasibility Study. 66 Palau Sustainable Tourism Strategy 2025–2028

5. Objectives, Priorities and Activities 2025–2028 7D Invest in tourism-enabling marine transport infrastructure and services that also serve local needs. 2025 i) Strengthen and maintain collaboration among agencies responsible for tourism and marine infrastructure to ensure that planning for marine transport infrastructure investment (a) considers demand growth scenarios, and (b) informs the setting of realistic growth targets. ii) Progress the tourism-enabling marine transport infrastructure priorities identified in the KBRUDSAP 2020–2030, the NIIP 2021–2030, and the state master plans. iii) Identify high-priority infrastructure projects to improve safety and access to key tourism sites, including local transport (e.g., new/improved piers) and the small-scale cruise ship segment (e.g., new/improved infrastructure for handling cruise vessel tenders and processing cruise passenger arrivals). To entail a) developing and maintaining a register of site-specific needs; b) determining the extent of public good (public use and/or economic benefit); and c) tabling a list of priorities for future investment planning exercises at the DMPSC and/or where suitable to attract necessary funding/investment (public or private). Co-leads: MPII/Bureau of Transportation and MOJ/Marine Law. OBJECTIVE 8: Progressing sustainable and resilient tourism-enabling public infrastructure and services that support both visitors and residents. STRATEGIC PRIORITIES AND ACTIVITIES 8A Pursue policies, investments, and programs in water and sanitation infrastructure and services that support sustainable tourism. 2025–2028 i) Strengthen and maintain collaboration among BOT/PVA, states, PPUC, PEWA, EQPB, and interested NGOs to a) determine risks and/or measures for any emerging risks to water supply/quality impacting tourism or generated by tourism activities; b) ensure that water and sanitation planning considers tourism demand growth scenarios and informs the setting of realistic tourism growth targets. ii) To be achieved through BOT’s participation in meetings on water resource management and supply and sanitation and PPUC’s representation at DMPSC meetings. iii) Progress water and sanitation priorities that (a) support sustainable tourism, and (b) feature in existing plans (NIIP 2021– 2030, PDP 2023–2026, KBRUDSAP 2020–2030, and state master plans). Co-leads: PPUC and PEWA. Partners: BOT, PVA, EQPB, states, and interested NGOs. 8B Pursue policies, investments, and programs in solid waste management infrastructure and services that support sustainable tourism. 2025–2028 i) Strengthen and maintain collaboration among BOT/PVA, states, interested NGOs, BPW, and KSG SWMO to a) determine risks and/or measures for any emerging waste management risks impacting tourism or generated by tourism activities; and b) ensure that solid waste management planning considers tourism demand growth scenarios and informs the setting of realistic tourism growth targets. To be achieved through BOT’s participation in waste management meetings and the BPW Division of Solid Waste Management and Koror State Solid Waste Management’s participation in the DMPSC meetings. ii) Scale up existing NGO, industry, and government initiatives to improve waste management practices at tourism operations, e.g., the FPNMS pilot program for waste segregation. iii) Continue community waste management awareness and cleanup campaigns. iv) Progress solid waste management priorities that (a) support sustainable tourism, and (b) feature in existing plans (NSWMP 2017–2026, NIIP 2021–2030, PDP 2023–2026, KBRUDSAP 2020–2030, and state master plans). Co-leads: BPW and KSG SWMO. Partners: BOT, PVA, states, and interested NGOs. 8C Pursue policies, investments, and programs in energy infrastructure and services that support sustainable tourism. 2025–2028 i) Strengthen and maintain collaboration among the BOT/PVA, states, PEWA, and PPUC to ensure energy supply planning considers tourism demand growth scenarios and informs the setting of realistic growth targets. To be achieved through BOT’s participation in energy sector planning meetings and PPUC/PEWA’s participation in relevant tourism planning discussions. ii) Progress the completion of all remaining energy sector priorities that support sustainable tourism. (To prepare a prioritized list from the NEMP (2019), NIIP 2021–2030, PDP 2023–2026, KBRUDSAP 2020–2030, and state master plans.) Palau Sustainable Tourism Strategy 2025–2028 67

5. Objectives, Priorities and Activities 2025–2028 Co-leads: PPUC and PEWA. Partners: BOT, PVA, and states. 8D Pursue policies, investments, and programs in ICT infrastructure and services that support sustainable tourism. 2025–2028 i) Strengthen and maintain collaboration among BOT/PVA, states, the Bureau of Communication (BOC), and network providers to ensure ICT supply planning considers the needs of tourism businesses and travelers. To be achieved through BOT’s participation in ICT planning meetings and BOC/network’s participation in relevant tourism planning discussions. ii) Progress the completion of all remaining ICT priorities that support reliable and affordable phone and internet coverage for businesses and visitors. (To prepare a prioritized list from the ICT Policy (2024), NIIP 2021–2030, PDP 2023–2026, and state master plans.) Leads: BOC. Partners: BOT, PVA, states, and network providers. 8E Progress investments in meetings and sporting infrastructure that attract events to Palau. 2025 i) Complete the upgrades of key sporting facilities in time for the Pacific Mini Games (track and field stadium, Palau High School Gymnasium, Meyuns Softball Field, Palau Gym, tennis courts). ii) Finalize construction plans for additional sporting facilities, including feasibility studies for adaptive sports venues. 2026 iii) Undertake a feasibility study for the construction of an eco-friendly, purpose-built convention center with a capacity for over 1,000 delegates. Co-leads: Palau National Olympic Committee, sports federations, and Palau Sports Commission. Partners: BOT and PVA. 8F Pursue policies and investments in health and emergency services infrastructure and services that serve the medical and emergency needs of visitors and residents alike. 2025–2028 i) Strengthen and maintain collaboration among the agencies responsible for tourism, health, medical services, and emergency services. To ensure preparedness for health and emergency issues that may impact tourism and for those that tourism may impact. Co-leads: MHHS, BPS. Partners: BOT and PVA. 68 Palau Sustainable Tourism Strategy 2025–2028

5. Objectives, Priorities and Activities 2025–2028 5.4. Priorities & Activities Theme 3: Supporting Conditions for Sustainable Tourism Sector Development OBJECTIVE 9: Managing appropriate controls, advice, and monitoring mechanisms that ensure tourism development in Palau is environmentally, culturally, and socially sustainable. STRATEGIC PRIORITIES AND ACTIVITIES 9A Progress policies and programs that ensure tourism operations do not negatively impact Palau’s environment, cultural/ historic heritage, and community members. 2025–2028 i) Prepare fact sheets that inform tourism business owners about the regulations that apply to their operations in relation to protecting the environment, historic/cultural heritage, and community. To clearly present the information for different business types and phases (e.g., construction, operations). ii) Design ways to improve collaboration and share resources across agencies responsible for tourism, environment, historic/ cultural heritage, and community matters in (a) communicating regulations, and (b) monitoring compliance. iii) Develop a minimum standards scheme for accommodation providers (3A) and tour operators (4D, 5D) that a) incorporates existing relevant regulations; and b) includes additional minimum standards deemed relevant to sustainable tourism. iv) Develop an accommodation quality assurance certification program to recognize high-quality benchmarks that include sustainability criteria (3B). v) Reinvigorate the Green Fins program for marine tour operators and roll out the Green Boots program for land tour operators to achieve respective objectives in environmental sustainability. vi) Incorporate sustainable tourism guidance into business development and product development training and advice (4B, 5B, 10B). 2026–2028 i) Continue and scale up the above activities. Co-leads: BOT and PVA. Partners: PVA, tourism operators, and environmental NGOs. 9B Define and manage carrying capacity volumes and visitor flow solutions for tourism attractions in environmentally and culturally sensitive locations. 2025 i) Engage independent advisers with expertise in determining carrying capacities and optimizing visitor flows at sensitive marine and terrestrial sites to recommend a) evidence-based carrying capacities for tourism attraction sites, piloting with the most visited; b) visitor management flows and systems for managing daily visitor movements around these sites in a way that optimizes revenues and mitigates risks of high-volume traffic; and c) community and industry awareness initiatives to build understanding about this exercise. ii) Seek state and national government agreement to adopt and enforce recommendations. 2026–2028 i) Scale up the above activities by rolling out to additional sites, as prioritized in the site register (4A, 5A). ii) Help community/private owners of sensitive sites to determine carrying capacities and visitor flow management flows for their sites. Co-leads: BOT, BOE, and states. Partners: PVA and expert NGOs. 9C Expand the development and implementation of state ecotourism plans for interested and relevant states. 2025–2028 i) Continue developing ecotourism plans for the states, as standalone plans or as part of master plans, drawing on the expertise of the states, PAN, BOT, and PVA. Leads: States. Partners: PAN, BOT, and PVA. 9D Expand the development and implementation of site management plans (SMPs) for all tourism attractions in environmentally and culturally sensitive locations. 2025–2026 i) Continue PAN’s leadership in developing and mobilizing management plans for protected areas. 2027–2028 i) Continue PAN’s leadership in developing and mobilizing management plans for protected areas. ii) Enable the development of site-specific SMPs for other state and private sites that tourists frequently visit. To include a) defined carrying capacities and visitor management controls (9B); b) a list of infrastructure development priorities; c) a plan for visitor experience development that is sustainable; and d) a plan for financial management. Co-leads: PAN and BOT Partners: States, PVA, and landowners. Palau Sustainable Tourism Strategy 2025–2028 69

5. Objectives, Priorities and Activities 2025–2028 9E Introduce a process for monitoring and measuring sustainable destination management in Palau by drawing on various partners’ data assets. 2025 i) Design a set of sustainable tourism indicators for Palau, using regional/global models customized for the local context. To be developed in partnership with national, state, private sector, NGO, and community partners, and to include economic, environmental, cultural, and social indicators. ii) Prepare an action plan for launching, monitoring, recording, and reporting sustainable tourism indicators. To be accompanied by a) MOUs to reflect agreed roles and responsibilities; and b) information systems to track results and/or serve as a repository for reported results (2A). 2026 i) Establish a consistent system for collecting, analyzing, and reporting environmental monitoring data for key tourist sites. To supplement broader sustainable tourism indicators with site-specific monitoring of the negative and positive impacts on biodiversity, heritage assets, and surrounding communities. ii) Design interventions that address the negative impacts identified through the monitoring activity described above. 2027–2028 i) Determine optimal carrying capacity volumes for the country as a whole, accounting for the available supply of public infrastructure and services (Objective 8) and food supply (Objective 11). Leads: BOT and PVA. Partners: All of Destination Management Partnership. 9F Facilitate opportunities for the wider community to share views about how tourism development does—or could—impact them positively or negatively. 2025 i) Undertake an annual community sentiment survey about tourism to identify any areas of concern to be considered in planning (1F, 12A). ii) Facilitate ongoing consultations between state leaders/tourism officers and residents about tourism development in general and development at specific sites. To provide opportunities to comment on proposed developments and have concerns addressed (1F, 12A). Lead: PVA. Partners: BOT, BOE, OCC, MOF, and FPNMS. 9G Progress the development of a visitor carbon offsets program for Palau. 2025 i) Seek independent technical experts to validate the suitability of carbon calculator options developed for Palau and provide guidance on designing a visitor carbons offsets program that aligns with international best practices. 2026–2028 i) Progress the program in accordance with the findings. Lead: PVA. Partners: BOT, BOE, OCC, MOF, and FPNMS. OBJECTIVE 10: Creating a business environment that enables micro, SME, and large private sector investment in sustainable and resilient tourism ventures. STRATEGIC PRIORITIES AND ACTIVITIES 10A Clarify and streamline business licensing and permit requirements for tourism business owners to minimize their time and cost burdens. 2025 i) Map all national and state licenses/permits required for different types of tourism businesses. To a) identify them according to different stages (e.g., approval, construction, operations); b) note the respective costs and approval processes; c) distinguish foreign and local requirements; d) determine costs and processes that are duplicative and/or cumbersome for a business owner; and e) highlight how costs and/or processes may be streamlined. ii) Prepare a communications piece for tourism-related businesses that outlines information under activities (a) to (c) above, using an easy-to-follow format tailored to the types of businesses. Assign a version number and date to allow for future updates. 2026–2028 i) Work with the agencies responsible for issuing licenses to progress reforms that simplify processes and reduce costs, creating a more enabling business environment for private sector investment. (Note: this activity needs to extend beyond tourism and be part of a broader reform agenda.) Lead: BOT. Partners: States and all national agencies requiring permits and licenses. 70 Palau Sustainable Tourism Strategy 2025–2028

5. Objectives, Priorities and Activities 2025–2028 10B Assist local micro, small, and medium-sized enterprise (MSME) owners in accessing the business and technical advice needed to start or grow a sustainable and resilient tourism business. 2025 i) Include questions in the proposed tourism business survey (1F) to identify the needs of existing and prospective tourism MSME owners for business and technical training, advice, and related support. To gather data on a) business skills needs (e.g., financial management, applying for a loan, tourism marketing, etc.); b) technical skills needs for different types of operations; c) preferred modes of training and advice delivery; d) business capabilities, intentions, and commitment to skills development; and e) barriers to investment and reinvestment. To include identifiers that enable the analysis of results by business type, size, age and stage, ownership factors (e.g., gender, nationality), location, etc. ii) Undertake an audit of the business and technical skills development support available to tourism MSMEs across state and national government programs, as well as private or NGO/donor-funded initiatives. iii) Reconcile the findings from activities (i) and (ii) above to identify any gaps or overlaps in business and technical training, advice, or other support for tourism MSME owners. To subsequently determine the opportunities for improving the delivery of necessary support to tourism MSME owners. 2026 i) Design and deliver business and technical training/advice to owners of tourism MSMEs in accordance with the above findings. To form part of the accommodation and product enhancement initiatives (3C, 4B, 5B), with a focus on a) convening and coordinating existing business training and development activities delivered by different partners to reduce duplication and use resources more efficiently; b) filling the gaps in tourism-specific business and technical training resources, tailored for different businesses based on their type, size, stage of business, and level of experience; and c) improving programs to provide delivery modes that are more favorable for business owners. ii) Promote available resources to existing and prospective tourism MSMEs, applying relevant selection criteria. iii) Start rolling out the program with partners. 2027–2028 i) Scale up the program with partners. Co-leads: BOT and PVA. Partners: States, PEFG, SBEC, PCOC, and WIOA. 10C Assist local micro, small, and medium-sized enterprise (MSME) owners in accessing the finance they need to start or grow a sustainable and resilient tourism business. 2025–2028 i) Draw on the results of the proposed tourism business survey to identify tourism MSME (a) financing trends, (b) financing barriers, and (c) financing needs. To filter these findings by business type, size, age and stage, ownership factors (gender, nationality), and location. ii) Conduct an assessment of financing options for tourism MSMEs with financial institutions to identify the current and future opportunities for local MSMEs and large tourism businesses. 2026 i) Use the findings from the above survey to tailor business training support for tourism MSMEs (10B), e.g., guidance on preparing loan applications with a bankable business case. ii) Collaborate with NDBP and other financial institutions to develop financial products that meet the needs of tourism MSMEs while minimizing unnecessary risks. iii) Explore options for business start-up or improvement grants for tourism MSMEs, with suitable criteria based on business case. 2027–2028 i) Continue the above activities as relevant. Co-leads: BOT and PVA. Partners: States, PEFG, PCOC, NDBP/commercial financial institutions, MOF, Palau SBDC, WIOA, and Grants Office. 10D Strengthen tourism industry networks to build more business partnerships for sharing knowledge, leveraging commercial opportunities, and lobbying for industry needs. 2025–2028 i) Encourage the private sector to join an industry representative body of their choice (e.g., Palau Chamber of Commerce, Palau Entrepreneurs for Growth). ii) Enhance the industry development efforts of BOT and PVA via a schedule of industry forums and networking events (1F). Co-leads: PCOC, PEFG, PVA, and BOT. 10E Explore options for addressing the escalating costs of doing business for tourism operations. 2025 i) Draw on the results of the proposed tourism business survey to quantify the increase in specific business input costs over the past few years. 2026 i) Facilitate collaboration among tourism industry bodies, lead tourism agencies, MOF, and other relevant agencies to identify ways to a) reduce costs for identified inputs; and b) offset costs via other solutions, such as subsidies for equipment/services that support sustainable and resilient business operations. (Note: this activity needs to extend beyond tourism and be part of a broader reform agenda.) Co-leads: PCOC, PEFG, PVA, and BOT. Partners: MOF and other relevant government agencies. Palau Sustainable Tourism Strategy 2025–2028 71

5. Objectives, Priorities and Activities 2025–2028 10F Facilitate investment by targeted foreign investors to meet the future needs for high-value tourism accommodation, transport, or experiences. 2025 i) Establish an MOU among FIB, BOT, and PVA, detailing the roles and responsibilities for tourism investment. ii) Prepare and maintain a list of all foreign investment applications for tourism with the DIMS (2A). 2026 (Further to the activities under 3E) i) Prepare an information package for prospective tourism investors. To include a) a copy of Palau’s investment policy and Act, and a statement on intention/criteria for investors; b) a snapshot of market research; c) profiles of identified investment opportunities (3E); d) information on the approvals/licenses/permits required for different tourism investments (approval, construction, operations) (10A); and e) contact details for investor inquiries. Package to be visually compelling, easy to follow, and available in print and online for download. ii) Offer investment facilitation support for qualifying tourism investors via a one-stop shop that a) responds to investor inquiries; b) connects investors with relevant contacts, including BOT, business advisory services providers (e.g., lawyers), and potential joint venture partners; and c) arranges site visits. 2027–2028 i) Conduct investor outreach when there is a need to find foreign investment partners for high-priority investments. To work with overseas posts to identify targeted prospective foreign investors for projects or joint ventures. ii) Explore options for introducing investment incentives that are a) targeted to investments that can deliver on priority tourism supply needs; b) available to investors who meet the criteria for sustainability credentials and business track record; c) non-discretionary and fair for local investors; and d) affordable for the economy. Co-leads: BOT, PVA, FIB, and MOF. OBJECTIVE 11: Developing linkages between tourism and other sectors that deliver community benefits without community burdens. STRATEGIC PRIORITIES AND ACTIVITIES 11A Initiate short- through long-term planning to strengthen linkages between agriculture and tourism, without depleting supply or inflating prices for residents. 2025 i) Strengthen collaboration between BOT and BOA to ensure that food supply planning (as per the Green Growth Plan) is central to determining the destination carrying capacities in the future. ii) Continue and expand the existing efforts of BOA, COC, and the Food and Agriculture Organization (FAO) to pilot agritourism initiatives, including but not limited to advertising day markets, pre-booked farm visits, and farm to fork lunches with farmers and women-led producer groups. 2026 i) Scale up mapping of current and potential linkages between food producers and tourism (hotel food supply and processed foods for visitors to take home). To refer to baseline data and research from the 2022 Slow Food/Sustainable Travel International study, and update with current data. ii) Identify the nature and scale of local supply that is meeting current visitor demand levels under current linkages and the implications on local supply for visitor growth scenarios. 2027 i) Identify new opportunities for expanding linkages for various food producer supply chains over a reasonable time frame, in a way that (a) aligns with BOA’s Green Growth Plan, (b) meets industry needs for quality, reliability, and consistency, and (c) won’t cause supply or price disruptions for residents. ii) Scale up awareness programs for food producers on how to link to the tourism sector in a way that (a) meets industry demand, and (b) generates reasonable returns. iii) Develop market access initiatives that link producers with buyers. iv) Identify solutions that enable necessary imports to meet visitor growth scenarios. Co-leads: BOA and BOT. Partners: AO, PVA, and PCOC. 72 Palau Sustainable Tourism Strategy 2025–2028

5. Objectives, Priorities and Activities 2025–2028 11B Design and implement programs that build linkages between the creative industries and the tourism sector now and into the future. 2026 i) Map the current and potential linkages between tourism and creative industries (e.g., performers, artists, craftspeople, and local souvenir producers). ii) Identify opportunities for expanding such linkages to meet the evidenced demand from tourism businesses and tourists. 2027 i) Design and deliver awareness programs for people in the creative industries on how to link to the tourism sector in a way that (a) meets the demand for specific services and goods, (b) preserves cultural integrity and authenticity, and (c) generates reasonable returns. ii) Develop market access initiatives that link members of the creative industries with buyers. Co-leads: BOT and PVA. OBJECTIVE 12: Fostering a tourism-aware community that ensures visitors feel welcome and safe, and residents feel respected and safe. STRATEGIC PRIORITIES AND ACTIVITIES 12A Undertake ongoing community engagement programs about tourism to build an understanding of its benefits, risks, and how community members can engage if they wish. 2025 i) Prepare easy-to-understand key messages that explain tourism, covering (a) its value to the economy, (b) benefits and risks to the environment, culture, and society (9F), (c) types of tourism jobs (6B), (d) types of entrepreneurship opportunities (10B), and (e) how the community can engage with tourism if they wish (1F). ii) Design and deliver a range of tourism awareness programs to communicate the above key messages. To use social media, radio, television, print media, events, and other channels as relevant to the messages and audience (1F). iii) Conduct an annual community sentiment survey about tourism. Share the results publicly and address the key concerns and positive sentiments (1F, 9F). Co-leads: BOT and PVA. Partners: NGOs. 12B Reinvigorate the Alii Host program or design a similar program for individuals interested in undertaking certification in customer service and sustainability tourism. 2026 i) Develop a training program that covers basic customer service skills and knowledge about Palau’s environment and culture, making it available to all interested residents. 2027–2028 ii) Roll out the program. Co-leads: BOT and PVA. 12C Identify and manage risks related to incidents that pose a significant threat to visitor safety and security. 2025–2028 i) Develop a risk management plan to deal with potential threats (e.g., crime, natural disaster, accident), including standard operating procedures (SOPs) for communication with local tourism stakeholders, tourists, foreign consulates, and local/ overseas media. ii) Monitor recurring issues that pose a significant threat to visitor safety and warrant a systemic solution through an investment, policy, or program. iii) Support tourism businesses in preparing and testing risk management plans, including disaster response SOPs. Co-leads: BOT and PVA. Partners: NEMO, BMT, and BPS. 12D Maintain vigilance about keeping communities safe from unscrupulous/dangerous tourism activity. 2025–2028 i) Monitor emerging issues that pose a threat to community safety and warrant a systemic solution through an investment, policy, or program. Partners: BOT, PVA, states, and BPS. Palau Sustainable Tourism Strategy 2025–2028 73

5. Objectives, Priorities and Activities 2025–2028 5.5. Priorities & Activities Theme 4: Destination Marketing and Distribution OBJECTIVE 13: Managing a destination brand that represents Palau and presents a compelling proposition to high-value, low-impact travelers. STRATEGIC PRIORITIES AND ACTIVITIES 13A Strengthen brand management to ensure the Pristine Paradise Palau brand remains true to its promise and continues to resonate with target audiences. 2025 i) Roll out the refreshed Pristine Paradise brand. Ensure brand guidelines are applied consistently in all PVA marketing applications and share guidelines and supporting content with marketing partners (states, local industry, airline, market/ online travel trade, and media). ii) Strengthen ongoing analysis of visitor data (2B) and market research (2C) to identify insights relevant to Palau’s destination brand. iii) Curate new content (PVA-owned, state-owned, and user generated content) that reflects the destination brand and can be applied to marketing activities. 2026 i) Continue the above activities on an ongoing basis. 2027 i) Undertake a brand health check to identify how the Pristine Paradise Palau brand is resonating with target audiences and aligning with its promise. ii) Refresh/redevelop the brand according to the results of the brand health check and relevant research. To ensure this is (a) documented in a brand development and management strategy, (b) documented in updated brand guidelines, and (c) reflected in all brand assets. 2028 i) Continue to manage the brand in accordance with the brand management strategy. Co-leads: PVA. Partners: States, local tourism private sector, and international travel trade partners. OBJECTIVE 14: Undertake evidence-based marketing activity that serves to convert high-value, low-impact traveler interest to bookings. STRATEGIC PRIORITIES AND ACTIVITIES 14A Design and roll out a medium-term Palau Marketing Strategy and annual marketing action plans. 2025 i) Strengthen ongoing analysis of visitor data (2B), market research (2C), and state/industry feedback to validate target markets (geographic source and niche segments) and define the “high-value, low-impact” visitor profile. ii) Prepare a 3-year marketing strategy for Palau based on this data. To identify (a) the most cost-effective consumer and/or trade distribution channels for reaching target visitors, (b) opportunities for cooperative marketing partnerships, and (c) priorities for investing in marketing assets/resources. iii) Prepare a 1-year marketing action plan detailing the tactical activities that will support the strategy. iv) Strengthen partnerships between PVA and the states in response to needs for (a) marketing advice and/or (b) marketing support. To align with the TDSP (1D). v) Continue to build local industry, airline, in-market/online travel trade, and media partnerships for targeted destination marketing activities (e.g., trade shows, familiarization visits, cooperative tactical campaigns). 2026 i) Roll out the 2026 Marketing Action Plan. ii) Prepare the 2027 Marketing Action Plan based on lessons learned, emerging market intelligence, partner activity, and budget. iii) Invest in new priority marketing assets (e.g., website, content, in-market representation) and resources/tools (e.g., marketing expertise, digital technologies) to support the strategy and plans. 2027 i) Roll out the 2027 Marketing Action Plan and prepare the 2028 Marketing Action Plan as above. ii) Explore the business case and opportunities for marketing partnerships with regional neighbors. 2028 i) Roll out the 2028 Marketing Action Plan. ii) Prepare a new medium-term marketing strategy for the next few years and the first-year annual plan. Co-leads: PVA. Partners: Local tourism industry, airlines, travel trade partners, and media in target markets. 74 Palau Sustainable Tourism Strategy 2025–2028

5. Objectives, Priorities and Activities 2025–2028 14B Develop and implement a rolling action plan for improving visitor access to information and bookings in Palau. 2025 i) Identify the needs and opportunities to improve services at the PVA Visitor Information Center (e.g., hours of operation, breadth of PVA/state/product information, level of staff product knowledge, promotion of Alii Pass, visual displays, availability of booking services). ii) Continue to update the PVA’s brochures and maps for distribution to visitors and look into new materials for interested states. iii) Strengthen partnerships between PVA and the states to prioritize signage needs, specifically (a) wayfinding signage for key attractions, and (b) interpretive signage at key attractions. To align with the TDSP (1D). 2026 i) Implement the priorities identified in the rolling action plan for improving visitor information services. ii) Revisit the idea to develop an app for visitors to meet future tourism information needs. iii) Strengthen partnerships between PVA and the states to provide advice on establishing a state visitor information center, if and when it is needed. 2027 i) Implement the priorities identified in the rolling action plan for visitor information services. 2028 i) Implement the priorities identified in the rolling action plan for visitor information services. ii) Explore opportunities for a real-time booking system for Palau’s tourism products as part of the next phase of destination management information systems (2A). Leads: PVA and states. Partners: Local tourism industry. Palau Sustainable Tourism Strategy 2025–2028 75 5.6. Top 10 Priorities for Year 1 of the Strategy The strategic priorities and activities for 2025 to 2028 reflect best practices in destination management, contextualized for Palau according to the perspectives and knowledge of tourism stakeholders. While all these priorities are important for achieving the goals and objectives outlined in the Palau Sustainable Tourism Strategy, it also makes sense to identify the highest priorities for mobilizing the strategy in its first year. The following list of the top 10 foundational strategic priorities is deemed the most critical for the successful rollout of the strategy in 2025. ❶ Ratify a national–state whole of government commitment to tourism as a priority sustainable economic sector for Palau. ❷ Form a Destination Management Partnership Steering Committee (DMPSC)— a cross-agency, national–subnational, and public–private–community representative task force—to facilitate the multi-stakeholder coordination required to implement and monitor the STS. ❸ Reorganize the national institutional arrangements for tourism (i.e., PVA and BOT) to ensure a more efficient and effective performance across contemporary destination management functions.62 ❹ Formalize a tourism development support program (TDSP) for states to access resources in developing and mobilizing tourism plans/priorities. ❺ Design, develop, and maintain a system for sourcing, storing, and utilizing destination management data. ❻ Identify tourism and hospitality skills gaps, training needs, and foreign workforce needs. ❼ Establish a register of products and experience development priorities for Palau’s current and prospective marine and terrestrial tourism sites. ❽ Define and manage carrying capacity volumes for the most visited tourism attractions in environmentally and culturally sensitive locations. ❾ Design and launch a minimum standards program for accommodation and tour operators that will ensure in the future that only those meeting minimum requirements for quality, safety, and sustainability can operate. ❿ Introduce a process for monitoring and measuring sustainable destination management in Palau by drawing on various partners’ data assets. At the end of the first year and based on progress made, a new set of highest priority activities will be determined for the following year, and each year thereafter. 62 This activity will require updating some of the lead and partner roles for PVA and BOT listed in this strategy. At the time of writing, many of the activities indicate these agencies will co-lead based on existing understanding and resources. However, the proposed review of institutional arrangements will enable ownership and support functions to be more clearly defined. This will help leverage the two offices’ core competencies, utilize resources more effectively, minimize duplication of efforts, and address gaps—all supporting more effective destination management. 76 • Palau Sustainable Tourism Strategy 2025–2028 APPENDICES

Appendix 1. Strategy Development Process Key activities included • Key informant interviews with public, private sector, and community leaders involved in tourism to gather • A desk review of the RTPF to determine key learnings. in-depth expertise and perspectives. • Research into global tourism trends and contemporary • State tourism assessments, workshops, and meetings destination management practices to identify relevant with state governors and representatives between April insights for Palau. and December 2024 to capture state-specific data and insights on current tourism supply and future tourism • A Palau Tourism Industry Consultation Workshop, held development priorities. in March 2024, to identify public, private, and NGO sector priorities for a new tourism strategy. • Drafting of the strategy based on consultations and research findings. • A Palau Tourism Stakeholder Sentiment Survey undertaken between March and April 2024 to canvass • Validation of the draft content with stakeholders through views about the future of tourism in Palau from across meetings/emails in December 2024. the community broadly. • Preparation of the final Palau Sustainable Tourism • Project team site visits to locations with current/future Strategy, followed by review and approval by the tourism visitation to understand tourism development President and Cabinet. opportunities and risks. Palau Sustainable Tourism Strategy 2025–2028 77 APPENDICES

Appendix 2. State Plans Aimeliik Resource List • Draft Aimeliik State Master Plan (2022) • Aimeliik System of Conservation Areas (ASCA) Ecotourism National Planning Documents Management Plan 2021–2025 • Palau Development Plan 2023–2026 Airai • Koror Babeldaob Resilient Urban Development Strategy • Airai Master Plan 2010 and Action Plan (KBRUDSAP) 2020–2030 • DRAFT Airai Master Plan 2023–2033 Key National Documents for Tourism Hatohobei • DRAFT Master Plan 2024–2034 (presentation) • Palau Responsible Tourism Policy Framework (PRTPF) • Helen Reef Management Plan 2017–2021 Kayangel • Palau Bureau of Tourism Strategic Plan 2019–2023 • DRAFT Kayangel Master Plan 2024–2034 (2023) • PVA Monthly Tourism Arrivals Reports • Kayangel PAN Management Plan • Tourism Reorganization Act of 1982 (aka PVA Act) Koror Other National Government Publications • Koror State Master Plan 1976 • Resilience Strategy for the Koror RISL (2023) • Disaster Risk Management Framework 2010 (amended 2016) • RISL Management Plan 2022–2027 • EQPB Strategic Plan 2021–2025 Melekeok • Foreign Investment Board Strategic Action Plan 2023–2028 • Melekok State Master & Land Use Plan 2012 • Foreign Investment Act, 2016 • DRAFT Melekok Master Plan 2023–2032 (2023) • Historical & Cultural Preservation Act, 1978 • Melekeok Climate Smart Resilient Development Guidance • National Biodiversity Strategy and Action Plan 2016–2025 (2018) • National Infrastructure Investment Plan 2021–2030 • Ngardok Nature Reserve Sustainable Tourism Plan, June • National Solid Waste Management Strategy 2017–2026 2023 • National Youth Policy and Action Plan 2023–2027 Ngaraard • Palau Blue Prosperity Plan (2022) • Ngaraard State Master Plan and Zoning Rules and • Palau Draft Water Policy (2024) Regulations 2023 • Palau Green Growth Plan (2023) Ngarchelong • Palau: Pathway to 2030, 1st Voluntary National Review • Ngarchelong State Master Plan 2024–2034 and Appendix on the SDGs (2019) Ngardmau Other Documents/Resources • Ngardmau State Master Plan 2023–2028 • Palau Aviation Feasibility Study (DFAT and Airbiz, 2024) • Sustainable Ecotourism Management Plan 2023–2029 • Palau Post Pandemic Recovery and Diversification – • OSCA Management Plan 2022–2026 Draft Report (Chung-Hua Institution for Economic Ngatpang Research, 2024) • Ngatpang State Master Plan 2024–2029 • PICRC studies about carrying capacity (2018) and • State Historical & Cultural Preservation Plan, 2021 snorkeling impacts (2018) • PAN Plan, 2024 • PSDI Tourism Snapshot Palau (2021) Ngchesar • Sustainable Tourism Pathways for Palau (Conservation • DRAFT Ngchesar State Master Plan 2024–2034 Strategy Fund, 2016) Ngeremlengui • ‘Tourism and Land in Palau’ – Article on PATA website • DRAFT Ngeremlengui Master Plan 2023. (Vogt, 2020) Ngiual • US Graduate School various resources • DRAFT Ngiual Master Plan 2023–2033 (2022) • Sustainable Ecotourism Management Plan 2023–2029 • Pilot Activity Promotion of Mangrove Ecotourism in Ngiual State Peleliu • DRAFT Peleliu State Master Plan 2023–2033 Sonsorol • DRAFT Sonsorol Master Plan 2024–2034 (2023) 78 Palau Sustainable Tourism Strategy 2025–2028 The Palau Sustainable Tourism Strategy is an initiative of the Ministry of Human Resources, Culture, Tourism and Development. It was led by the Bureau of Tourism in partnership with the Palau Visitors Authority, Governors Association, and many representatives of national and state governments, the private sector, NGOs, community members, and international development partners. The strategy was developed with technical assistance from the Pacific Private Sector Development Initiative (PSDI) – a regional technical assistance facility co-financed by the Government of Australia, the Government of New Zealand, and the Asian Development Bank (ADB). For more information or a copy of the summary version of the strategy, contact bureauoftourism@gmail.com.