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Tourism is back in the game …

Some 720,000 tourists visited Iceland in the first five months of 2023, more than over the same period in any previous year since 2018.The outlook is promising for the peak season and beyond. We forecast that just over 2.1 million tourists will visit Iceland in 2023, and nearly 2.5 million in 2025.

According to new figures from the Icelandic Tourist Board, 158,000 foreign nationals departed the country via Keflavík Airport in May, putting the month in second place in the May rankings. Only in 2018 did May departures from Keflavík Airport exceed this year’s total.

Americans were the largest nationality group during the month, accounting for nearly one-fourth of all tourist visits. Next in line were visitors from Poland (9%), France (7%), and Germany and the Netherlands (6% each). The Nordic countries combined accounted for 8% of the visitor total during the month. The strong seasonal pattern among British travellers as a share of the visitor group can be seen clearly in the chart below. Visitors from the UK outnumbered all other nationalities in Q1, as Iceland is a popular wintertime travel destination among the British, while southerly climes tend to lure them during the summer.

… and will be in fine fettle in the coming term

Departure figures from Keflavík Airport show that nearly 1.7 million foreign nationals visited Iceland in 2022. This total does not include those who arrived via the Akureyri airport and those who came by cruise ship and Smyril Line ferry. The total for the year was the largest since 2019.

Thus far in 2023, visitor numbers have been consistent with our early February forecast. Economic headwinds in the UK and elsewhere, which we had considered a potential threat to demand for Iceland travel early last winter, have had no discernible impact on tourist flows. In the first five months of the year, some 720,000 foreign nationals came to Iceland via Keflavík Airport.

Most indicators, including tourism company bookings, airline flight schedules, and opinion polls, suggest that the summer 2023 season will be a very busy one.

In our freshly baked macroeconomic forecast, we project that just over 2.1 million tourists will arrive via Keflavík Airport this year, about the same as in 2017, followed by 2.3 million in 2024 and nearly 2.5 million in 2025. If this forecast is borne out, the next two years will set new records for the tourism industry. It should also be noted that the totals forecast here include only departures via Keflavík Airport, not cruise ship passengers and visitors travelling to Iceland with the Smyril Line ferry.

The slower increase later in the horizon is due in part to capacity constraints posed by a shortage of accommodation and other tourism-related infrastructure. For instance, new hotel construction in greater Reykjavík is at a low ebb relative to the past few years. Even if construction companies pick up the pace in the near future, the supply of guest accommodation is unlikely to improve during the forecast horizon, and furthermore, the gradual rise in the real exchange rate could dampen demand for travel to Iceland.


Jón Bjarki Bentsson

Chief economist