Iceland desires to attract tourists to its bubbling hot springs, picturesque ice caps and moon-like lava landscapes – but not on the expense of its residents or nature.
The small Nordic country known for fire and ice is just not alone. From Amsterdam to Venice, hotspots world wide have taken measures to curb the negative effects of overtourism while preserving what is commonly a hugely essential source of income.
“We are still trying to shape the tax system for the tourism sector for the future,” Iceland’s Prime Minister Bjarni Benediktsson told CNBC via video conference.
“We would focus more on a system where the user pays. In my view, we would focus more on access fees for the magnets, as we call them, across the country,” Benediktsson said.
“This way we could manage traffic. So at the peak of demand we could impose a higher tax, which we could control by changing the fees both within a day and between months or during parts of the year. But that is still under development.”
The Icelandic government implemented the so-called Tourist tax with the aim of raising funds for sustainability programs and mitigating the environmental impacts of mass tourism.
The levy, which was suspended throughout the Covid-19 pandemic, imposes a small fee of 600 Icelandic krona (US$4.34) for hotel rooms, with various costs also applying to campsites, motorhomes and cruise ships.
Benediktsson described his predecessor's reintroduction of the tourism tax as an “important decision” for the country, but said the federal government needed to take further steps to seek out the fitting balance.
As chairman of the right-wing, pro-business Icelandic Independence Party, replaced Katrin Jakobsdóttir was elected Prime Minister at first of April. He had previously served as Prime Minister in 2017.
His second term as head of state comes at a time when the country is scuffling with rising rates of interest, high inflation and a series of volcanic eruptions.
At the tip of last month, a volcano erupted in southwest Iceland. for the fifth time since Decemberwhich spewed lava, once more threatening the coastal town of Grindavik.
The seismic activity also forced the evacuation of considered one of the country's most visited attractions, the Blue Lagoon geothermal spa. The lagoon has since been reopened to tourists after authorities said the outbreak had stabilized.
Booming tourism revenues
Iceland’s tourism sector has recovered from a slump throughout the coronavirus pandemic. The country – which is one Population of around 383,000 — expected This 12 months, 2.3 million visitors are expected, in 2025 almost 2.4 million and in 2026 even 2.5 million.
Revenue from tourism is becoming increasingly essential for Iceland’s economy.
In fact, the tourism sector accounted for 8.5% of gross domestic product in 2023, in accordance with Statistics Icelandciting preliminary figures from the Tourism Satellite Accounts. This represents a rise of seven.5% in 2022 and exceeds the 8.2% average recorded within the pre-Covid period from 2016 to 2019.
Looking to the longer term, Benediktsson said the federal government is working on further developing its tourism tax system with its own “sustainability balance check”.
“We have developed a system where we look at certain indicators: Is nature in balance in a certain place? Is society satisfied with the development? Is the traffic light green, yellow or red?” said Benediktsson.
“When we see that places are being damaged by the number of visitors, for example at Geysir, where there are hot springs, we have to take action,” he added.
“These are the things we are trying to develop. We are trying to track the indicators and make sure that the industry is well accepted in society, but also in nature.”
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