For most backpackers, Panama City is the natural starting point for a trip through Panama. You land at Tocumen International Airport with a backpack, probably a little tired, possibly sweating before you have even left the airport, and suddenly you are surrounded by a huge modern city with skyscrapers, tropical greenery, Spanish colonial buildings, traffic, buses, taxis and people going in every direction.
The good news is that you don't need to spend a fortune or overthink where to stay. For a backpacker, the most important thing is choosing a neighborhood that gives you easy access to the interesting parts of the city, places to meet other travelers, affordable food and convenient transportation. You are probably not coming to Panama City to sit inside your hostel all day. You want to get out, explore, meet people and then continue your journey into the rest of Panama.
For most backpackers, Casco Viejo and El Cangrejo are the two areas worth looking at first. They offer very different experiences, and choosing between them mostly comes down to whether you want atmosphere or convenience.
Casco Viejo: the classic backpacker introduction to Panama
If this is your first time in Panama, Casco Viejo is hard to beat for atmosphere.
Casco Viejo, also called Casco Antiguo, is the historic heart of Panama City. It is filled with old Spanish colonial buildings, plazas, churches, narrow streets, cafés, restaurants, bars and little corners where you can simply wander around without having a particular destination.
For a backpacker, that is extremely valuable.
You can leave your hostel in the morning, grab an inexpensive breakfast, walk around the old city, explore the plazas, take photographs and eventually end up at the waterfront looking across the bay at Panama City's enormous modern skyline.
It feels like two completely different cities sitting directly across from each other.
During the day, Casco is great for wandering around. At night, it becomes one of the more social parts of Panama City, with bars, restaurants, rooftop terraces and hostels where travelers are coming and going.
That makes it particularly good if you are traveling alone.
You don't necessarily have to organize a complicated night out. You can meet someone in your hostel, walk around the neighborhood, find a bar and suddenly you're having drinks with people you met twenty minutes earlier.
That's backpacking.
The downside of Casco Viejo
Casco isn't necessarily the cheapest part of Panama City.
You are paying for the location and atmosphere, and some accommodation can be considerably more expensive than a basic hostel elsewhere.
It can also be noisy, especially around popular nightlife areas.
If you're looking for the cheapest possible bed and don't care about being surrounded by historic buildings, you can probably find better value elsewhere.
But if you're backpacking through Panama and want your first couple of nights to feel like the beginning of an adventure, Casco Viejo is a very strong choice.
El Cangrejo: the practical backpacker choice
El Cangrejo is a completely different experience.
Instead of historic colonial buildings and cobblestone streets, you get a modern Panama City neighborhood with restaurants, cafés, supermarkets, bars, apartments and plenty of everyday city life.
It isn't as photogenic as Casco Viejo, but it is extremely practical.
And backpackers should never underestimate the value of practical.
You can get food without paying tourist prices, buy snacks for the next part of your trip, find a supermarket, do laundry, use the Metro and get around the city relatively easily.
The area around Via Argentina is particularly useful because there are lots of places to eat and drink and plenty of activity.
If you're traveling for several weeks or months, these little conveniences start to matter.
You don't need a beautiful colonial building every time you leave your hostel. Sometimes you just need a cheap restaurant, a supermarket and a place to wash your clothes.
Which one is better for solo backpackers?
Both can work extremely well.
Casco Viejo probably has the stronger immediate tourist and backpacker atmosphere. You walk outside and you're surrounded by travelers, bars, restaurants and things to see.
El Cangrejo is more of a real city experience. You're living among the normal rhythm of Panama City while still having easy access to the tourist attractions.
If you arrive alone and your biggest priority is meeting people, I'd look particularly closely at hostels in Casco Viejo.
If you're traveling with a friend or partner and want a convenient base from which to explore, El Cangrejo can be an excellent option.
Don't stay beside the airport unless you have a reason
One of the easiest mistakes for first time visitors is looking at the map and thinking:
"The airport is here, so I'll stay near the airport."
There is absolutely nothing wrong with staying near Tocumen Airport if you're arriving at midnight and flying out at six in the morning.
But if you've got three days in Panama City, staying beside the airport doesn't make much sense.
You will simply spend your time traveling back and forth into the city.
The airport area is useful for catching an airplane.
It isn't where you want to base your Panama adventure.
Get into the city.
What about staying near the skyscrapers?
If you've never seen Panama City before, the enormous skyline can be surprisingly impressive.
The modern areas around Avenida Balboa, Marbella and Bella Vista are filled with skyscrapers, restaurants, shopping and modern apartment buildings.
For some backpackers, this is exactly what they want.
You get a completely different impression of Panama from Casco Viejo. Instead of feeling like you're in an old colonial city, you feel like you're in one of the major modern cities of Latin America.
The waterfront area is also excellent for walking and watching the sunset.
The disadvantage is that it can feel less like a backpacking destination. You're surrounded by modern buildings and business districts rather than the compact, social atmosphere of Casco Viejo.
It's certainly worth exploring, but if you're only staying two or three nights, I'd probably choose somewhere with more character.
San Francisco is another option
San Francisco is another central neighborhood that can work well for backpackers who want restaurants and everyday city life.
It is more residential and less touristy than Casco Viejo.
You won't step outside and immediately feel like you've entered a historical attraction, but you'll find plenty of restaurants and services around you.
It's particularly useful if you are staying longer and want to experience something closer to normal life in Panama City.
For a first two night visit, though, I'd generally look at Casco Viejo or El Cangrejo first.
How long should a backpacker stay?
I'd recommend two or three nights for most backpackers.
One night is enough to sleep, look around and leave, but it can feel rushed.
Three nights gives you enough time to actually experience the city.
You could spend one day exploring Casco Viejo and the waterfront, another day visiting the Panama Canal and exploring another part of the city, and then have another evening to socialize and prepare for the next stage of your trip.
After that, you can start heading into the rest of Panama.
And that's where things get interesting.
Don't spend your whole Panama trip in Panama City
Panama City is fascinating, but it isn't representative of the entire country.
Once you leave the capital, Panama changes dramatically.
You can go from skyscrapers to cloud forest, Caribbean islands, Pacific beaches, jungle rivers and tiny mountain communities surprisingly quickly.
That's one of the reasons Panama works so well for backpacking.
You can start your trip surrounded by skyscrapers and, a few days later, be sleeping in a hammock in the middle of the jungle.
Getting around the city
Another reason you don't need to obsess over staying in exactly the perfect neighborhood is that getting around Panama City is relatively easy.
The Metro is useful in the areas it serves, buses cover large parts of the city and ride hailing can be convenient when you don't want to figure out public transportation.
For backpackers, this means you can choose a hostel based on overall atmosphere and price, rather than insisting that it has to be within five minutes' walk of every attraction.
Just remember that Panama City traffic can be heavy. Something that looks extremely close on a map can take considerably longer during busy periods.
The backpacker's neighborhood cheat sheet
Casco Viejo: Historic, social, atmospheric and great for meeting travelers. Lots of restaurants, bars and things to explore on foot.
El Cangrejo: Practical, central and generally good for budget travelers. Restaurants, supermarkets, Metro access and everyday city life.
Bella Vista and Marbella: Modern Panama City, skyscrapers, restaurants and access to the waterfront.
San Francisco: More residential and local feeling, with plenty of restaurants and services.
Amador: Great waterfront location and sunsets, but less convenient as a base for exploring the entire city.
Tocumen Airport: Good for sleeping before or after a flight. Not a great base for exploring Panama City.
What I would do as a backpacker
If I had just landed in Panama with a backpack and had never been there before, I'd probably book two or three nights in a social hostel in Casco Viejo.
I'd arrive, dump my backpack, take a shower and get out walking.
I'd explore the old streets, find some cheap food, walk along the waterfront and watch the skyscrapers light up across the bay.
I'd spend the next day seeing something completely different, such as the Panama Canal, and then come back to the hostel in the evening and see who else is around.
That's the beauty of staying somewhere social when you're backpacking.
You don't have to know anybody when you arrive.
You can walk into the common room with absolutely no plan and leave an hour later with people to have dinner with, people to explore with or possibly even people who become your travel companions for the next week.
Then, after two or three nights, leave the capital and start seeing the Panama that most backpackers actually came here for.
Head toward the mountains around Boquete, the jungle and cloud forest, the Pacific beaches, Santa Catalina, or continue toward Bocas del Toro and the Caribbean.
Panama City is the doorway.
You don't necessarily need to spend a week standing in the doorway.
Spend a few nights, soak it up, meet some people, get your bearings and then start heading into the jungle, mountains and islands.