Booking engines rebooted

As the BBC reported on its website, the British public have welcomed the news about easing of restrictions, responding with a surge of bookings through UK travel agencies. It is worth remembering, however, that even if the UK authorities ease their own border restrictions, the question of how easily British travellers can enter other countries remains unanswered. The UK is no longer a member of the European Union (EU), of course, and unlike Iceland, it has never been part of the Schengen Area, which provides for open borders within Europe. As a result, it is not covered by the EU’s harmonised travel guidelines and the guidance issued by the European Centre for Disease Prevention and Control, on which the colour-coding scheme for COVID risk is based. Even so, we think it likely that both sides will exert significant pressure to grease the wheels of travel between the UK and other European countries over the course of this year, and we in Iceland will reap the benefits of Schengen participation and EEA membership in this respect.

The importance of British tourists

The recent reports from the UK are good news for the Icelandic tourism industry, irrespective of the aforementioned uncertainties. Although surveys taken in our key market areas suggest that appetite for travel is still strong and that European people are generally willing to make travel plans at much shorter notice than before, there has been little solid information on when such travel can resume with minimal inconvenience at national borders. The news from the UK shows that greater certainty about the border situation encourages many would-be travellers to go ahead and book trips abroad.

But how much could this easing in the UK affect tourism in Iceland?

According to data from the Icelandic Tourist Board, some 262,000 British tourists visited Iceland in 2019, or just over 13% of the total for the year. Only the US, at 23%, accounted for a larger share of visitors in 2019. The UK percentage rose steadily in the early part of the 2010s but then tapered off as the number of travellers from North America and Asia increased during the years just before the COVID-19 pandemic.

But the importance of British travellers for Iceland’s tourism sector is in some respects greater than these numbers suggest. For instance, British visitors bought some 16% of all hotel bed-nights in domestic hotels in 2019.

In addition, British visitors exhibit different travel patterns and behaviour than travellers from other market areas do. Britons’ visits to Iceland have been spread much more evenly over the year, for instance: a full ¾ of their trips to Iceland in 2019 took place outside the peak season; i.e., the first four months and the last three months of the year. Because of this, they play an important role in smoothing out the seasonal peaks and valleys in Icelandic tourism, and they generate off-peak revenues for hotels, restaurants, and recreation providers.

On average, British tourists spend a shorter time in Iceland than others do – 5 nights as opposed to the 6.6-night average for all tourists combined. This shorter stay goes hand-in-hand with the larger share of wintertime trips, as people’s free time is generally more limited in the winter, with long weekends often taking the place of stays of a week or more.

Furthermore, Britons have generally spent more per day in Iceland than the average tourist does. In 2018, for example, average spending among British travellers in Iceland came to just over ISK 37,000 per day, and of the countries most heavily represented among visitors to Iceland in recent years, only American and Chinese visitors spent more.

Britons could prove a windfall next winter

In 2019, revenues from foreign tourists totalled ISK 470bn, including an estimated ISK 50bn from British wallets, based on the aforementioned figures on length of stay and daily spending. Thus it is very important for revenues and overall activity in the tourism industry that Britons resume their travel to Iceland sooner rather than later. But it takes two to tango, as the saying goes, and assuming that the UK authorities’ plans to ease border restrictions in May actually materialise – which in turn depends on the pandemic itself and the progress made with inoculations in Iceland and abroad – we think there is reason to be optimistic that British tourists will start coming to Iceland in greater numbers later this year. In particular, they could provide a real boost to tourism in Q4/2021 and Q1/2022 if they resume their established winter travel pattern.

One of the main assumptions underlying our recent macroeconomic forecast is that 700,000 tourists will visit Iceland this year. In that forecast, we projected that the Nordic countries and the western part of mainland Europe (Germany, France, etc.) would account for the lion’s share of summer visitors but that British tourists would arrive in greater numbers as the year advanced. It could take longer, however, for American and Canadian tourists to arrive, and longer still for visitors from Asia. The latest news from the UK reinforces our opinion. Hopefully, other European countries, as well as the US and Canada, will prepare and publish similar plans in the weeks and months to come, as reducing uncertainty about travel restrictions is exceedingly important for the tourism sector – and, by extension, for the economy as a whole.