Obscure islands set to become luxury tourist hotspot

Palau, a nation of sparsely populated Pacific islands surrounded by turquoise waters teeming with fish and giant clams, is so obscure most people must scour a map to find it. But with a crop of high-end resorts coming up, the islands may soon become a luxury tourist hotspot.

Tropical Palau lies east of the Philippines and north of Indonesia, and there are only 21,000 inhabitants.

It recently relaxed laws to allow new resorts to be set up, and Palau's legislature, based in a grandiose Roman-style building that is surrounded by nothing but rolling countryside and sea views, is also pushing a bill that would allow casinos and investment from some of the big names in Las Vegas.

Once the scene of a bloody World War Two siege, and a US territory blocked from developing at its own pace, the nation is now aiming for 250,000 tourists per year and it needs 4000 hotel rooms, up from 1100 today, to get there, said Jackson Henry, Palau's ambassador to Taiwan.

"The goal of tourism in Palau is quality, not quantity," Henry said. "Because of our fragile marine eco-system, Palau does not aim at mass tourism. Instead, Palau targets the selective high-end visitors."

Only a nation since 1994, Palau already attracts about 84,000 tourist arrivals per year, largely from east Asian countries such as Japan and Taiwan, and often divers.

They are drawn by vertical coral dropoffs patrolled by reef sharks, turtles and 2-meter Napoleon wrasse fish. Snorkellers can float past schools of dancing butterfly fish or menacing barracuda, while iridescent clams snap shut as shadows pass by.

"After you've seen all the big stuff, you start looking at the little things," said a dive instructor who only gave his name as Matias, hunting for multicolored nudibranches and shrimps near the Carp Island Resort, which is trying to attract more European tourists.

"This is Palau," he said, shaking his head in wonder, having left his diveshop in Spain to work there early this year.


The resort is in the Rock Islands, described by guide Lonely Planet as the jewel of Micronesia, and where erosion has carved forested specks sprinkled across lagoon-like waters. Changing sea levels have left marine lakes, one filled with millions of harmless pulsating jellyfish -- unique swimming companions.

For those looking "topside," or above land, there is a mysterious ancient ruin, old stone money the size of tables left behind by raiding Yap islanders, and traditional longhouses covered by paintings of fish and bats that tell village stories.

About 300 new hotel rooms are already under construction.

A 120-room Chinese-owned hotel will open next year, and a 185-room, $30 million five-star Korean-invested hotel will become Palau's largest resort when it opens in 2012. Another Korean investor is planning a golf course, Henry said.

"After visiting cities such as Bangkok, often what tourists like is to see is something in its natural condition," said S.K. Kim, local agent for the future 185-room Palau Ocean Resort.

Amanresorts, an international hotel chain mostly owned by DLF, India's largest listed real estate firm, said it was also planning a small-scale boutique resort in the islands.

European investors have acquired 200,000 square metres for another resort, and a firm from the United States intends to buy 500,000 square metres for yet another, Henry said.

Palau last year extended maximum land leases for foreigners from 50 to 99 years, while President Johnson Toribiong has moved to cut paperwork.

"There's certainly significant interest in Palau and justifiably so," said Anthony Gill of the Asian Development Bank.