There is only one hostel you should stay at during your trip to Panama City and that is Luna’s Castle. It is the best hostel in Panama City, without question.
Luna’s is located in the historical part of Panama City (Casco Viejo) in an old colonial house. Unlike when I was there, it now also boasts a nice bar in the basement, making it an even more perfect backpacker location.
Following Captain Morgan’s plundering of the Panama Vieja in 1671, stones from the ruins were used to construct the massive walls of Casco Viejo in 1673, which is the part of town with by far the most history in this country.
Luna’s Castle rests upon this original city wall. It was built in 1905.
Casco Viejo is the historic heart of Panama City. Designated a World Heritage Site by UNESCO in 1998, Casco Viejo is the oldest city on the Pacific coast of the Americas. The past decade has seen major restoration projects spring up in this part of town. These days Casco Viejo is vibrant with restaurants and bars and something for everyone to enjoy.
The reviews that backpackers give of this large property high marks across the board. Dorm rooms cost $13-15 per night and their are some private rooms available for $30-39. It is simply the best hostel to stay at in Panama City.