ICELAND: Is Iceland Tourism Declining?

Decreasing profits and slowing wages, on top of a recent economic forecast showing the industry will contribute significantly less to growth over the next three years, might indicate that the wave is cresting for Iceland’s tourism industry.

A recent poll amongst tourism business owners shows that about 25% of respondents reported either breaking even or losing money this year. In the same poll taken last year, conducted by the Icelandic Travel Association (SAF), only 17% reported the same result.

Part of the explanation for this is that the Icelandic króna has strengthened by about 16% this year, while the US dollar and the euro have weakened.

There is more to the story than currency exchange rates, however. RÚV reports that wages in the tourism industry are not rising at the same rate as the overall wage average in the country. While wages on average in Iceland rose by 28% between 2010 and 2014, wages in the tourism sector increased by 24%.

In fact, professor of economics Þórólfur Matthíasson wrote a column wherein he compared the current state of the tourism industry to the “herring boom” in 1960. Where fishing industry players had overfished stocks of herring and cod, he argues, airlines are overreaching potential tourists to Iceland.

As reported, a new economic forecast from Landsbanki shows that that in 2016, Iceland’s total economic growth will be 6.1%. Without the tourism industry, growth would be at 1.2%.

Looking forward, the bank predicts that non-tourism growth will increase slightly over the next three years, while tourism will contribute significantly less with each coming year. This will mean the country’s economic growth as a whole will decline, from 6.1% today to less than half that by the end of 2019.

Interestingly, the declining contributions of tourism to the country’s economic growth will be inversely proportionate to the numbers of tourists actually visiting the country.

While over a million tourists will have visited Iceland by the end of this year, these numbers will continue to increase. About 2.5 million tourists are predicted to visit Iceland in 2019, despite the fact that the increase in tourists is expected to steadily decrease.

ICELAND: Iceland Must Ready For Influx In Tourism

The Icelandic Travel Industry Association (SAF) warns that improvements are necessary at the more popular Icelandic tourism destinations before next summer.

Roughly 600.000 tourists are expected to visit during next year’s summer months, nearly twice Iceland’s population and there is growing concern over whether Iceland’s more visited tourism hot spots are able to cope with the influx of travellers within the summer period.

“We believe and trust that the situation as it stands now will improve,” The managing director of SAF, Helga Árnadóttir, told Túristinn. “It has to improve. Sometimes it’s not a question of money but other issues that cause a hold up, like organisational problems etc.”

This summer saw 507.000 visitors travel to Iceland, meaning SAF expects the number to rise by almost 20% in just one year.

“It’s not that the situation at tourist destinations is bad all over the country,” said Helga. “It is that at the more popular destinations circumstances are not up to par, but Iceland is full of natural wonders and we can make it easier to encourage tourists to spread out across the country.”