Trade policy analysts say Palau's US$111 million mass tourism industry needs to change.
An assessment by the Pacific Islands Forum suggests Palau would be better off luring just the creme de la creme of visitors who will spend more and have less impact on the environment.
A policy analyst for the Pacific Islands Forum, Gainmore Zanamwe, says creating infrastructure which encourages investment from overseas businesses is the first step.
"They need to at least adopt the latest technology to improve connectivity internet access, because some of these tourist that we are targeting they are business people that's why we also need to ensure that either the telecommunications letter is either liberalised or the services are improved or updated."
Mr Gainmore says a PIF report due in June will outline what changes Palau needs to make and include a detailed breakdown of costs.