Icelandic Financial Market Digest 05. aprílPublisher: Íslandsbanki Research • Resp.Editor: Ingólfur Bender
Tourism booming worldwide
Tourism has been one of the world’s fastest-growing sectors in recent decades. The number of destinations available to travellers is rising continually. The tourism industry has created jobs, generated foreign exchange revenues, and underpinned strong GDP growth and societal development in many countries. Globally, tourism accounts for 10% of GDP, 7% of foreign exchange revenues from goods and services exports, and one of every eleven jobs.
The number of international tourists worldwide grew by 3.9% in 2016, the seventh year in a row to see an increase. This is the longest continuous period of growth in international tourist numbers since the 1960s. The total number of international tourists worldwide was roughly 1,235 million in 2016, a year-on-year increase of 46 million. In comparison, the total in 1950 was 25 million. These figures are from data published by the World Tourism Organization (UNWTO).
Global growth in tourist numbers outpaces population growth
Last year, the rise in international tourist numbers worldwide was nearly four times the increase in world population. This is in line with the trend in recent years, with the number of international tourists rising as a proportion of the global population. The global ratio of international tourists to population was 17% in 2016, up from just over 9% in 1995. Growth in international tourist numbers has therefore outpaced global population growth by a factor of more than four during the period. This is because a steadily growing proportion of the global population has an opportunity to travel, with improved air travel, lower airfares, and rising purchasing power.
UNWTO forecasts an increase in international tourist numbers of 3-4% this year and just over 3% per year through 2030, when the total number of tourists will be about 1.8 billion. This is more than three times forecasted population growth over this period. International passengers will equal over a fifth of the global population by 2030, if UNWTO’s forecast materialises.
Tourism in Iceland growing at ten times the global rate
The number of foreign tourists in Iceland rose by 40% in 2016, or more than ten times the global rate of increase. The difference this year will also be substantial if forecasts are borne out. As we discussed in our recent tourism industry report, we expect a 30% rise in the number of tourists visiting Iceland in 2017, or about 8-10 times more than UNWTO’s forecast for global tourism.
In 2016, about 0,1% of international tourists worldwide came to Iceland. The vast increase in tourist visits to Iceland in 2016 – 40% YoY – accounted for only 0.6% of the global increase. This shows how large and fast-growing the market is.
Long-term forecasts of international tourist numbers give cause for optimism regarding the long-term growth potential of the Icelandic tourism sector. Iceland is not sold out in terms of transport, accommodation, or resource utilisation in this arena. There are abundant opportunities for Iceland in the large and rapidly growing global tourism industry.
Icelanders travel abroad at ten times the global rate
A record number of Icelanders travelled abroad last year. Icelandic nationals’ departures via Keflavík Airport (KEF) totalled over 536,000 in 2016, or 161% of the population of the country. This is nearly ten times the global rate of 17%. It is also an all-time high, up from just under 80% at the beginning of the current upward cycle. The share of Icelanders travelling overseas has been rising swiftly in recent years, owing to increased flight offerings, declining airfares, the appreciation of the ISK, and the improvement in households’ financial position. We expect Icelanders to smash this record again in 2017, as the first two months of the year showed a 23% YoY increase in departures via KEF.
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