Where will you go post-pandemic?
Iceland hopes you’ll visit them on your next trip,
In a normal October, the Radisson BLU Saga Hotel in Reykjavik would be buzzing with tourists hoping for a glimpse of the northern lights, business travellers in town for trade fairs, honeymooners gearing up for a tour of Iceland’s waterfalls and geothermal spas. This year, of course, things are very different.
“It’s surreal,” said Ingibjorg Olafsdottir, the hotel’s general manager. “It’s completely quiet.”
Since March, even with government support, Olafsdottir’s staff has shrunk from140 to just 16. The hotel, which has more than 200 rooms, normally has an occupancy rate of above 75 per cent, but it fell to 11 per cent in September.
“It’s been emotional,” Olafsdottir said, adding that, even after cutting down to bare-bones operations, the hotel continues to rack up debt. “But the thing is, I think everybody is in the same boat here.”
Tourism is undergoing an unprecedented downturn all over the world, but several factors make Iceland particularly vulnerable to the industry’s crash: geographic isolation, a small domestic population, strict border measures and an economy that — after an extraordinary, decadelong tourism boom — had come to depend heavily on foreign tourists. A recent surge in coronavirus cases has added to Iceland’s challenges.
But while visitor numbers are low, Iceland is positioning itself for a major tourism rebound after the pandemic. The government is investing more than $15 million in tourism infrastructure, while improving roads and harbours across the country. To keep the tourism industry afloat in the short term, the government is also investing more than $11 million in a program that distributes free travel vouchers to Icelandic citizens and residents. A marketing campaign targeting domestic tourists was rolled out in the late spring; an international version will be unveiled as soon as travel restrictions are lifted.
The government hopes that when people go to book their first post-pandemic flights overseas, Iceland will be at the top of their list.
The tourism boom
A lack of tourists was the last thing Icelanders were worrying about in 2018, when the country welcomed a record-breaking 2.3 million visitors — more than six times Iceland’s population.
It was the height of a tourism boom that most observers trace to 2008, when a steep drop in the value of the Icelandic krona — which was linked to the economic crisis that hit the country that year — suddenly made Iceland much more affordable to outsiders. Then in April 2010, the cloud of ash from the eruption of Iceland’s Eyjafjallajokull volcano forced the temporary closure of a large swath of European airspace — and put Iceland into headlines around the world. The government had rolled out the “Inspired by Iceland” marketing campaign just a few weeks after the eruption hit the news, and what started as a travel nuisance turned into a giant publicity boon.
Tourism took off. Visitor numbers rose from 459,000 in 2010 to more than 2.3 million in 2018. Economically, tourism came to account for 8.6 per cent of gross domestic product and 39 per cent of the country’s total export revenue. Roughly 30,000 people — nearly 16 per cent of Iceland’s workforce — were employed in the tourism industry in 2018.
Signs of tourism’s impact began cropping up in Reykjavik: Dunkin’ Donuts appeared in 2015 (all locations have since closed); a Hard Rock Cafe opened the following year; H&M arrived in 2017. In the countryside, sites that had once welcomed a handful of visitors were full of tour groups. Many tourists were seen parking their camper vans illegally, while others were caught defecating wherever they pleased.
“In a typical summer, you would see camper vans parked just about anywhere,” said Jenna Gottlieb, the author of the Moon Iceland travel guide and an American who has lived in Iceland since 2012. “That gets a lot of backlash from people, because there aren’t toilets in a parking lot or wherever people are parking. It’s seen as so disrespectful.”
Concerns started to mount. Foreign experts and many Icelanders worried about the pressure that tourists were putting on the country’s fragile natural landscape. “Overtourism” appeared in a travel story about Iceland in 2016, and use of the term began to spread.
Of course, it wasn’t to last. In 2017, the Icelandic krona strengthened, making the country more expensive. In March 2019, Wow Air, an Icelandic low-cost airline, collapsed. Tourist numbers that year declined by about 14 per cent, to just under two million. And then came 2020.
‘Everyone is crying’
The summer started off fairly well. Coronavirus numbers in Iceland were low and travel within Europe’s Schengen Area, of which Iceland is a member, began opening up. Travellers to Iceland could choose either to undergo a virus test on arrival or self-quarantine for 14 days. At the same time, the government rolled out a campaign to promote tourism among the island’s roughly 366,000 inhabitants, offering tourism vouchers worth 5,000 krona (about $47) to every Icelandic resident over age 18.
The summer was “pretty good, considering everything,” said Bjarnheidur Hallsdottir, the chair of the board of the Icelandic Travel Industry Association and the chief executive of two tourism companies. “And then suddenly out of nowhere, the government decided to change the rules at the borders. Since then, everyone is crying.”
Under the new rules, which took effect on Aug. 19 and are still in place, arriving passengers may choose either to submit to two screening tests for the virus, separated by five days’ self-quarantine, or to skip border screening and self-quarantine for 14 days after arrival.
As in most parts of the world, the tumult of the last several months has triggered a surge in unemployment in Iceland. Between March and August of this year, about 8,000 people — roughly four per cent of the country’s labour force — were laid off, according to Iceland’s Directorate of Labour; most of those layoffs were in tourism.
Hallsdottir says tourism operators are now looking to the government to help them cover running costs, or to pay the wages of a few personnel who can keep the companies afloat.
“If no one answers the phone or answers the emails, there will be no tourism next year,” she said.
Investing for the future
After the 2008 banking crisis, Iceland’s tourism boom helped propel the country into an impressive economic rebound. But while the rapid growth in foreign arrivals created jobs and revenue, it also outpaced the government’s ability to build the infrastructure needed to manage so many new visitors. Now, with tourist numbers low, the government has a chance to catch up.
This year, the Icelandic government is investing roughly 1.7 billion Icelandic krona (about $16 million) in infrastructure at both public and private tourist spots across the country, said Skarphedinn Berg Steinarsson, director general of the Icelandic Tourist Board.
The investments were already being planned last year, but the government increased the funding after the pandemic hit. Further investments will support harbour and road improvements.
The improvements at tourist sites have two goals, Steinarsson said: “allowing them to receive bigger numbers — creating parking spaces, walking paths, etc. — but also preserving the nature to make sure that the sites will not be worn down when we get the visitors back.”
Among the projects are the construction of a viewing platform on Bolafjall Mountain in the Westfjords, as well as infrastructure at Studlagil Canyon, where a viewing platform is being installed, as well as new walkways, toilets and information signs. These improvements are meant to keep tourists safe (the Bolafjall site features a steep cliff ), while also protecting the landscape from environmental damage and improving the overall visitor experience.
The kind of infrastructure being installed at Studlagil is already in place at most of Iceland’s more established destinations, particularly in the Golden Circle — an area not far from Reykjavik that includes some of the country’s most famous tourist destinations: Gullfoss waterfall, Geysir Geothermal Area and Thingvellir National Park, among other spots. While the infrastructure in those areas is already fairly good, Steinarsson said, any areas that are particularly fragile will need continual upkeep — and funding — to protect against damage from visitors.
Plenty of Icelanders would have seen these places over the last several months, and enjoyed them with smaller crowds than usual. A marketing campaign encouraging Icelanders to explore their country was rolled out in the late spring (“Iceland — come join us!”), while the government’s travel voucher campaign helped to jump-start demand for hotels, restaurants and attractions. So far, Icelanders have used more than $1.6 million worth of the vouchers, which are valid through the end of the year.
“It was a success,” said Steinarsson of the efforts to encourage domestic tourism. “Icelanders really enjoyed their country during the summertime. And that’s what counts.”