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The Outlook for Iceland’s Tourism Industry in 2022

Iceland’s Tourism Industry
Iceland’s tourism industry is one of the country’s most dependable money-makers and job providers. Like many countries, Iceland’s tourism industry underwent severe economic losses and lacked new jobs and job security because of the COVID-19 pandemic. However, the Bank of Iceland, Islandsbanki, released a report publishing its expectations for a significant resurgence in tourism for Iceland in 2022.

Tourism’s Importance to Jobs and Economic Growth in Iceland

Tourism provides 39% of Iceland’s annual export revenue and contributes about 10% to the country’s GDP. Iceland’s tourism industry accounts for 15% of the workforce. In 2017, 47% of Iceland’s newest jobs were in some way related to the tourism industry.

Iceland experienced a devastating financial crisis in 2008. Job availability dropped nationwide, the poverty rate increased and the GDP dropped dramatically in the following years. It took some forecasting, but the Icelandic government developed plans calling for the tourism industry to be the savior of the Icelandic economy.

To this end, the government established a brand new Tourist Control Centre, which coordinates the government’s work in tourism nationwide. It creates new typical tourist surveys and improved cooperation under the government’s four tourism ministries. The government also implemented efforts to track the most popular tourist destinations and receive input from tourists on how to improve their experiences at those destinations.

Iceland’s tourism is so popular that the government has had to devise limits on how long individuals can rent on Airbnb and on whom must receive limitations. Rental cars are similarly limited, with nearly 80% of tourists reported renting a car at least once during their visit to Iceland. The airfare to Iceland is one of the cheapest deals year-round.

The tourism industry has been primarily responsible for the economic boom that has occurred since 2012. The plans that the Icelandic government developed went into effect in Fiscal Year 2012 and involved the government’s expanding funding opportunities in the tourism industry.

Since the expansion of the tourism industry, the increase in job availability and economic growth, Iceland has made great strides in keeping the poverty rate low and the population of those at-risk of poverty lower than what was possible pre-2012.

Impact of COVID-19 on Iceland’s Tourism Industry

Iceland has the lowest poverty rate in the world, but the COVID-19 pandemic put this at risk. The international average for a country’s poverty rate is 11%, but Iceland has the world beat. The country’s poverty rate is at 4.9% and has been dropping since the expansion of the tourism industry.

Furthermore, there were an estimated 36 Icelandic citizens for every 1,000 who were at risk of falling into poverty in 2008, at the beginning of the economic crisis. Since then, the number rose briefly above 40 individuals then rose and fell for several years, but distinctly dropped in 2014. This coincided with the beginning of the full establishment and implementation of Iceland’s expanded tourism industry.

The pandemic’s impact on tourism left the country with another drop in jobs and an economic dip. During the COVID-19 pandemic, Iceland experienced a 10-month long halt in tourism. Iceland’s GDP dropped from $24 billion to $19 billion in one year largely because of the loss of tourism between 2019 and 2020, according to Data Commons.

Expected Resurgence in Iceland’s Tourism

As soon as it became feasibly safe, Iceland reopened its borders to tourists with clear instructions. First, it allowed tourists to travel to the country as long as they isolated themselves for 14 days prior to their trip and were able to provide a negative COVID-19 test taken within 72 hours of arrival in Iceland. Since then, Iceland has allowed its visitors to arrive without those other restrictions as long as the tourists are fully vaccinated and boosted against the virus.

The increase in Iceland’s tourism is not unprecedented. In 2018, the increase in tourism was 5.4% and in 2017, it was 24.1%. Icelandair, the main airline for travel to Iceland, has its own plan for balancing safety and getting as many tourists to Iceland as feasible in the works.

Iceland’s central bank, Islandsbaski is expecting a minimum of 1 million tourists to Iceland, but as many as 1.3 million may come. In November 2021, there were a meager 75,000 tourists for the entire month. However, this is more than 20 times the final tally for tourists for that month in the preceding year.

Even though tourism paused for the better part of a year, the tourism industry is ready and raring to go. Despite the pains of the COVID-19 pandemic, the Icelandic tourism industry will reopen in 2022 as much as possible and the economic boost to come from it is invaluable.

– Clara Mulvihill
Photo: Flickr