A report is forecasting Palau to have its lowest tourism arrivals in nearly a decade.
Palau airport on Babelthuap island Photo: RNZI Walter Zweifel
The latest economic review by the Graduate School USA in Washington said visitors this year will fall below 100,000 this year for the first time since 2011.
The report said the tourism industry is "in crisis", with arrivals are expected to drop 25 percent to less than 90,000.
However, it said the economic impact on Palau will be buoyed by a fiscal surplus.
Palau's tourism arrivals from China have plummeted since its government banned state-run tours to Palau at the end of 2017.
President Tommy Remengesau has said the move is a response to his government's recognition of Taiwan.
Last year, Palau announced a set of new laws which would shift its tourism market away from mass arrivals and toward high-end "green tourism".
These included strict environmental protections like a ban on some sunscreens, and tough penalties for non-compliant tour operators.
But in its economic review released last week, the Graduate School USA said tourism had been unregulated and development continued "virtually unconstrained".
"[Palau] will have limited options to mitigate the vagaries of market forces and improve the likelihood of achieving its high-value tourism policy objectives."
