Boston, MA -- (SBWIRE) -- 01/27/2014 -- The Icelandic travel and tourism sector's review-period (2008?2012) performance was adversely affected by the country's slip into recession in 2008. However, despite the volcanic eruption at Eyjafjallajokull in 2010, international and domestic tourism activity increased overall. Domestic tourist volumes rose at a review-period CAGR of 1.89% while international arrivals increased at a CAGR of 7.60%. According to the World Travel and Tourism Council (WTTC), in 2012, the sector accounted for 19.5% of Icelandic GDP and 20.9% of total employment.

Key Highlights

- The Icelandic travel and tourism sector registered a downturn in 2008 as the country's economy slipped into crisis and the country's three major privately owned commercial banks - Glitnir, Landsbanki and Kaupthing - collapsed. According to World Bank data, Iceland's GDP shrank by 6.6% in 2009 and 4.1% in 2010.
- The dip in travel and tourism activity in the country was expected to decline further following the volcanic eruption at Eyjafjallajokull in 2010. However, the disaster turned into an opportunity as thousands of tourists flocked to Iceland to witness the volcanic activity. Media coverage of the eruption presented Iceland on an international platform. Furthermore, the devaluation of the krona due to the financial crisis also pushed down the price of goods and services in the country. These factors supported the growth of what became known as 'volcano tourism' by many Icelandic tour operators.
- Domestic tourism is dependent on income levels and propensity to travel. A high unemployment rate leads to a fall in residents' inclination to spend. During the review period, domestic tourism was impacted by a high unemployment rate prevailing in the country in the wake of the financial crisis. However, the unemployment rate, which increased from 2.2% in June 2008 to 7.5% in June 2009, fell to 5.2% in June 2012.
- Iceland also recorded an increase in the number of visitors from emerging markets such as China and Russia. According to the Icelandic Tourist Board, between January and September 2013, the number of Chinese tourists through Keflavik International Airport increased at a rate of 24.4%, while the number of Russian visitors increased at a rate of 54.3%. In April 2013, a Free Trade Agreement (FTA) was signed between Iceland and China; it is expected to further strengthen trade and tourism ties between the two countries.
- Growth in the volume international departures from Iceland is expected over the forecast period. The expected growth can be attributed to the increasing air capacity and better connectivity to key destinations. For example, Iceland Air launched services to Anchorage in Alaska during the summer months (May-September) of 2013. The company also increased the frequency of its flights on key routes. Gatwick-Iceland was increased to four times a week and London-Iceland was increased to three times a week.

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Companies Mentioned in this Report: Air Atlanta Icelandic, Icelandair Group, Air Iceland, Wow Air, Eagle Air Iceland, Grand Hotels Iceland, Hilton Reykjavik Nordica, Radisson Blu Hotels Iceland, Hotel Borg, Icelandair Hotel Reykjavik Natura, Guðmundur Jonasson Travel, Atlantik - Iceland, Iceland Tours, North Sailing, Iceland Travel, Hertz Iceland, Budget Car Rental Iceland, Avis Car Rental Iceland, Europcar Iceland, Thrifty Car Rental Iceland

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