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March 22nd, 2016

Tourism in Iceland

Iceland has long been dependent on income from its travel industry, which contributes over 5 percent of GDP. It has seen the need to develop a more coherent and integrated approach to tourism and is being rewarded with large annual increases in visitor numbers, which topped a million for the first time last year.

The initiative

In May 2012, PKF International was commissioned by Promote Iceland to carry out a master mapping project for the Icelandic tourism industry and to establish its foreign direct investment potential. It had the following objectives:

  • To increase the profitability of the tourism industry.
  • To engage in systematic development of tourist destinations, effective product development, and promotion and advertising work so as to create the opportunity to lengthen the tourist season, reduce seasonal fluctuations, and encourage tourists to travel throughout the country.
  • To enhance the quality, professionalism, safety, and environment awareness of the tourism sector.
  • To define and maintain Iceland's uniqueness as a tourist destination, in part through effective analysis and research.
  • To create a platform for the government and tourism industry stakeholders to formulate a long-term strategy.

A new Tourist Control Centre has been established to coordinate operation and work out ways in extensive cooperation all over the country for an industry that is very complex, and which is under the administration of four ministers.

In order to study the tourism industry, several steps were undertaken, including:

  • Conducting a limited international tour operator survey to build on existing travel surveys
  • Evaluating the key geographic source markets and segments and identifying potential opportunities.
  • Formulating a ten-year vision with clear targets.
  • Specifying the institutional framework and tourism policy requirements.
  • Preparing an annual monitoring and evaluating the grid to enable the Icelandic tourism industry to monitor the progress of the implementation of the long-term strategy.
  • Preparing an indicative annual budget.

The challenge

In 2012, the responsibility for tourism in Iceland was very fragmented. In order for tourism to flourish, the government and the Icelandic tourist board needed to adopt a coherent and integrated approach to the sector.

The public impact

The number of foreign visitors to Iceland reached 807,000 in 2013, contributing over 5 percent of GDP. [1] The 2015 figure is expected to exceed a million for the first time. The foreign visitors’ spending was ISK129 billion in 2013, and the travel industry is predicted to turn over ISK620 billion (EUR4.35 billion) in 2020 and ISK1,000 billion (EUR7.02 billion) in 2030. This makes a major contribution to Iceland’s economy, one of the hardest hit by the financial crisis of 2007-08.

Stakeholder engagement

The stakeholders are very supportive of the objectives of Iceland’s tourism policy, and are working towards its implementation. There has been extensive cooperation between municipalities, travel agents and tourism.

Political commitment

The Icelandic government is generally supportive of tourism in Iceland:

  • It set up the Tourist Site Protection Fund, which supports the development and maintenance of infrastructure that protects nature at frequently visited attractions and at new sites. [2]
  • The Icelandic Tourist Board works in close co-operation with governmental agencies, municipalities and legislators.

Clarity of objectives

Iceland 2020 has very clear objectives across all sectors of the economy, including a specific “growth agreement for tourism.” [3]

Strength of evidence

To understand the requirements of the tourism industry, surveys and SWOT analysis was undertaken. The Tourism Strategy Group was replaced with the Tourism Council, to implement the policy, as recommended by the OECD.

In 2012, PKF team conducted surveys with 22 visitors, who were from from the UK, USA, Canada, Denmark, Italy, Netherlands, Germany, Spain, Austria, Japan and Switzerland. The purpose of the survey was to understand the visitor experiences and perceptions at first hand, rather than to undertake a comprehensive analysis. It was found that Iceland is more expensive than its Nordic competitors, mainly due to the high cost of flights and car hire.


To expand the tourism industry in Iceland, many approaches were undertaken to test the feasibility of the policy. Surveys were conducted, funding mechanisms were reviewed, and environment and social carrying capacity were taken into consideration.

A development fund for tourism, national parks and protected areas is to be established with the revenue levied from tourist taxes. Funding mechanisms were also reviewed to close the funding gap for infrastructure at tourist sites. Environmental and capacity concerns were taken into consideration, to establish which tourist destinations in each region required better access and traffic management.


On the basis of an agreement made between the Icelandic government, the Icelandic Association of Local Authorities, and the Icelandic Travel Industry Association (SAF), the Tourism Task Force was set up, which will continue in operation until the end of 2020.

The Tourism Task Force consists of four cabinet ministers, four representatives of the tourism industry, and two municipal representatives. The Task Force follows the Road Map for Tourism and its managing director draws talent from Iceland and abroad to address the most pressing priorities in the tourism industry.

It will ensure that the next five years are used to lay the solid foundations that are needed by the Icelandic tourism industry. The Task Force's function is to coordinate measures and find solutions in collaboration with government and municipalities, as well as the support the framework for growing tourism throughout the country.


Performance measurement is based on the goals achieved in a particular year. These statistics are maintained and published by the Icelandic Tourist Board.

It is evident, however, that Promote Iceland and the Tourist Board need to adopt a robust approach to monitoring and evaluating the performance of the tourism industry on a regular basis, in close co-operation with Statistics Iceland and the Tourism Research Centre.


There is extensive cooperation between stakeholders and the government, as in the formation of the Tourism Task Force.

There is a steering group within the Task Force of public, private and other stakeholders which meets monthly and is chaired by the minister for industry and commerce. It also includes representatives from:

  • Other Icelandic ministries that are relevant to tourism (finance, the environment, and the foreign office)
  • Private firms (represented by industry associations, etc)
  • Other tourism organisations (e.g., travel agents)

The steering group tracks progress, resolves issues, allocates roles to sector entities and takes decisions, as appropriate. The group's staff are responsible for such tasks as managing coordination between sector stakeholders and providing operational support for nature funds. There has, overall, been extensive cooperation between municipalities, travel agents and other authorities in formulating policy.

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