Iceland Tourism Slows Due to Volcanic Activity, High Costs

Post by: Dr. Amrinder Pal Singh

Tourist bookings in Iceland are growing slower than expected due to high prices and frequent volcanic eruptions near inhabited areas.

Winter bookings have been up to 15% below forecasts, according to data from the Icelandic Tourist Board. Despite rapid post-pandemic recovery, tourism was poised for growth until intense seismic activity began in October, resulting in four eruptions near inhabited regions.

"We noticed a decline in new bookings as early as November," said Johannes Thor Skulason, managing director of the Icelandic Travel Industry Association. "Although there's been some recovery, the impact of the seismic activity and media coverage persists."

Previously, volcanic activity in remote areas benefited tourism, but eruptions near the Blue Lagoon spa and inhabited regions are now deterring foreigners.

Iceland's robust economy is also diminishing its appeal to foreign visitors. Rapid growth has led to price hikes, with inflation exceeding 10% last year and remaining high. The central bank has raised interest rates by 850 basis points since May 2021, now boasting the highest benchmark rate in Western Europe at 9.25%.

"We're simply becoming too expensive," stated Arnar Mar Olafsson, director general of the Icelandic Tourist Board. Despite forecasting a record 2.4 million visitors this year, representing a 10% increase from the previous year, Olafsson noted that Iceland's rates and inflation are double those of peer countries on both sides of the Atlantic, putting the country at a disadvantage.

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