Tourism in Palau is at a crossroads. Global recognition of Palau’s stunning environment, biodiversity, and the many initiatives in place to ensure its pristine condition have led to more market opportunities than ever before. However, dramatic increases in visitor arrivals within the past two years and the rapid proliferation of budget-oriented tourism development to service those visitors have led to concerns about devastating consequences on the industry, environment and society. Before 2014, Palau’s tourism industry was driven largely by higher spending consumer segments dominated by the diving market. In 2014 and 2015, a dramatic spike in packagedtravel groups from the Peoples Republic of China (PRC) shifted Palau’s tourism industry changed the nature of the tourism experience in Palau. This shift into mass-market tourism has been driven by vertically integrated package tours, bringing visitors who have prepaid their full itinerary, resulting in lower in-country visitor spending. Additionally, the dominance of a single source market, largely consisting of first-time travelers and the entry of numerous new, inexperienced tour operators into the tourism sector have strained the capacity of regulatory and management bodies to ensure that tourism in Palau is both profitable and sustainable. Issues stemming from erratic air service schedules, a proliferation of charter flights, and a lack of transparency in airport operations have challenged Palau’s tourism sector to target and receive desired visitor markets via consistently scheduled air service. Hotel development projects aimed to service the low-end packaged traveler have cluttered the market and degraded Palau’s pristine brand. To make matters worse, Palau’s identity as an exclusive world-class diving destination is eroding, due to significant overcrowding at key sites. Resolving these issues is crucial. Resolution will require the political will of the ROP government and a coordinated industry. The Responsible Tourism Policy outlines the way forward. We must all pull together to implement needed solutions.