According to recently published figures from the Icelandic Tourist Board, just under 177,000 foreign nationals departed Iceland via Keflavík Airport in September – about the same as in September 2016 and 2019, and just over ¾ of the record high from September 2018. The September total is also in line with the forecast we published last month.
Tourism in full swing after the pandemic
Activity in the tourism sector was about the same last month as in September of 2016 and 2019. Prospects for the near future are good, although the coming winter is highly uncertain, particularly as regards British tourists. We expect some 1.7 million foreign nationals to visit Iceland this year, followed by around 2 million in 2023.
In keeping with the recent pattern, Americans were the largest nationality group, with 30% of the month’s total, followed by visitors from Germany (9%), the UK (6%), and Spain and France (5% each). Travellers from the other Nordic countries combined accounted for 8% of September visitors. Thus far, however, Asian tourists have been few and far between in the wake of the pandemic, with only one of every hundred tourists hailing from China and neighbouring areas.
Winter setback in the offing?
After two punishing years dominated by the pandemic, prospects for the tourism sector have improved rapidly.
Departure figures from Keflavík Airport show that nearly 1.3 million tourists visited Iceland in the first nine months of 2022, the largest January-September total since 2019. Although travellers from Asia are far fewer now than before the pandemic, visitors from the US and Europe have made up the shortfall.
It is worth noting that according to the UN World Tourism Organization, global travel in the first seven months of 2022 measured only 57% of the pre-pandemic level. In Iceland, the seven-month total was 77% of the pre-pandemic level, while this year’s peak-season total was well over 90% of the 2019 figure.
To be sure, there is substantial uncertainty about tourism in the months to come. The economic outlook has grown markedly bleaker for many of the countries whose citizens are likeliest to visit Iceland. It is particularly ambiguous for mainland Europe and the UK. Visitors from the UK are especially important for wintertime tourism in Iceland. As the chart above shows clearly, travellers from the UK stood out from the crowd during the pre-pandemic years, with 3 of every 4 British tourists visiting Iceland outside the peak season.
Fortunately, though, there are few signs as yet that shrinking purchasing power and a poor economic outlook have affected appetite for travel to Iceland. That said, it should be borne in mind that travel behaviour worldwide has changed markedly since the pandemic struck: people book trips at shorter notice than before and appear more willing to cancel or postpone at short notice than they used to be.
Positive signs on the horizon for the near term
The outlook for the coming term is good despite significant uncertainty about matters in the UK and mainland Europe over the winter. The status of bookings and the growing number of flights to and from Iceland, not to mention Google Trends data on online searches, suggest that this year’s tourist numbers could be on a par with the 2019 total.
In our most recent macroeconomic forecast, we project that 1.7 million tourists will visit Iceland in 2022, about the same number as in 2016, if our forecast materialises. We expect tourist numbers to rise to 2 million in 2023 and 2.2 million in 2024. It is worth noting that this forecast is based solely on departures via Keflavík Airport, but a large number of visitors will travel through the airport in Akureyri or by cruise ship.
The slower increase later in the horizon is due in part to the ambiguous economic outlook on both sides of the Atlantic, as well as to the higher real exchange rate, which will make Iceland a costlier destination than it has been recently.
The total head count is not the only determinant of revenue generation, either: the length of each visitor’s stay and the amount each spends on goods and services while in the country are also important factors. Fortunately, it appears that revenues per tourist are on the rise. Maintaining this trend is important for the sector in years to come.