… 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.