Tourism is the major export earner in Iceland, accounting for ISK 520 billion in 2018 – equivalent to 39% of total export revenue. The sector directly contributed 8.6% of GDP in 2017, and employed some 30 000 people – representing 15.7% of the workforce. Travel exports represented 47.7% of total service exports in 2018.

After nine consecutive years of growth in tourism arrivals, the trend has recently slowed. International tourist arrivals totalled 2.0 million in 2019, representing a 14.2% decline from 2018. This is due mainly to reduced air access but also a strong Icelandic krona. The top three source markets by volume are the United States (23.4% of international tourists), the United Kingdom (13.2%), and Germany (6.7%). Together, these three markets account for 43.3% of total tourist arrivals.

Domestic tourism is relatively stable, with domestic overnight stays totalling 1.1 million in 2018, representing 13% of total overnight stays.

The Ministry of Industries and Innovation is responsible for developing tourism policy and co-ordinating the work of governmental bodies. The recently merged Department of Tourism and Innovation, is the lead department and it oversees the operation and performance of the national tourism board, the Icelandic Tourist Board.

The Icelandic Tourist Board’s responsibilities include the implementation of government tourism policy, planning and support for regional development, licencing and monitoring of licenced activities, data collection, processing and presentation, safety, quality and consumer protection in relation to tourism, and administration of the Tourist Site Protection Fund.

Visit Iceland is the official destination marketing office, charged with attracting visitors to the country. It is part of Promote Iceland, which is a public-private partnership established to promote Icelandic exports, foreign direct investments and Iceland as a tourism destination. Promote Iceland is overseen by the Ministry of Foreign Affairs.

A Tourism Task Force established in 2015 was charged with implementing the Road Map for Tourism in Iceland covering the period to 2020. The Task Force includes different representatives of ministries responsible for tourism, finance, environment and natural resources, and transport and local authorities. The Task Force has served as a co-ordinator in Iceland’s efforts to address tourism’s impacts. When its mandate comes to an end in 2020, a revised Tourism Council, with wider membership, will continue much of the Task Force’s work.

Local municipalities are responsible for the planning and management of many visitor attractions. With the support of the Icelandic Regional Development Institute, associations of municipalities operate Development Agencies, which have delivered a variety of tourism projects, including the newly launched Arctic Coast Way touring route. Seven regional marketing offices collaborate extensively with both Promote Iceland and the Icelandic Tourist Board, which provides financial support.

The overall public budget allocated to tourism in 2019 was ISK 2.2 billion, allocated as follows: ISK 714.4 million to the Icelandic Tourist Board, ISK 544 million to the Tourist Site Protection Fund, and ISK 1 billion to tourism services, of which ISK 405 million was for marketing and promotion.

The key challenge for Iceland is to maximise the gains from tourism while protecting the assets upon which tourism depends. Tourism growth has increased pressure on nature, infrastructure and society. Tourism planning, infrastructure investment, data collection, tourist safety and visitor flow management remain priorities. Improved skills and quality (Box 1.13), and increased digitalisation of the sector are also important to maintain competitiveness. Reducing carbon emissions from tourism related activities is a further area of focus as part of the Government’s plan for Iceland to become carbon-neutral by 2040.

A new long-term Tourism Policy Framework 2020-30 with a strong focus on sustainability was published in 2019. This will guide the work on a new action-oriented tourism strategy from 2020, together with a new Tourism Impact Assessment model, which takes the carrying capacity of the environment, infrastructure, society and economy into account and is fundamental to the future development of Icelandic tourism. Data from a new Environmental Assessment tool launched in 2019, to assess the status of protected areas and natural attractions, feeds into the Tourism Impact Assessment framework (Box 3.16).

Infrastructure at tourist sites is improved through the strategic National Infrastructure Plan, featuring 3-year rolling investment plans, and the Tourist Site Protection Fund. Criteria are being defined for the establishment of a Model Tourism Sites programme that will promote an exceptional tourist experience at selected natural attractions. Legislation is underway to enable a concessions regime for private tour operators to operate on public land. There are also plans to improve co-ordination in the field of nature conservation, with the establishment of a new National Park Institute.

Regional co-ordination is centred on seven regional Destination Management Plans developed in 2018-19, supported by the planned establishment of destination management organisations (DMOs) in each region by the end of 2021. The new DMOs will have a broader remit than the regional marketing offices currently in existence, and will co-ordinate tourism priorities and regional development with a broad mandate including data collection, innovation, product development, skills, digitalisation and marketing.

Marketing efforts under the Inspired by Iceland banner continue to focus on responsible travel behaviour. Tourism-specific policy actions to reduce carbon emissions include plans to increase the proportion of rental cars running on alternative fuels and the electrification of harbours.

Other areas of policy focus include:

  • A Route Development Fund established in 2015 to encourage air access into regional airports.

  • Development of the Arctic Coast Way long distance road route.

  • Improvement of data collection arrangements via the Icelandic Tourist Board, including the recently established Tourism Data Dashboard.

  • Development of a digital toolbox to make it easier for tourism businesses to analyse their technology needs and find solutions.

  • Startup Tourism accelerator programme to encourage innovation in tourism, support new companies, create more recreational opportunities, and encourage tourist distribution across seasons and around the country.

  • Tourism Cluster Initiative to promote competitiveness and value creation within the Icelandic tourism industry and to develop a co-operative network.

  • Legislation on sharing accommodation economy, which limits home sharing to 90 days per year per household.

  • Improvements to the regulatory framework of the tourism sector, following on from an OECD Competition Assessment Review of Laws and Regulations.

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