"Looking for cheaper options"

Skúlason says that the first quarter saw a 6% increase …

Skúlason says that the first quarter saw a 6% increase in tourist arrivals in Iceland, but that overnight stays decreased by 15%. mbl.is/Kristinn Magnússon

Jóhannes Þór Skúlason, CEO of the Icelandic Travel Industry Association, says that the effects of high interest rates can be felt in various sectors of the tourism industry, not just in the restaurant sector.

This week mbl.is reported that restaurant operators were deeply concerned about the situation in the industry and that restaurants were going bankrupt almost every week.

Aðalgeir Ásvaldsson, CEO of the Icelandic Association of Enterprise in the Restaurant Industry (SVEIT) , said that the high interest rate is one of the biggest cause of these operational difficulties.

15% decrease in number of overnight stays

According to Skúlason, the first quarter saw a 6% increase in tourist arrivals in Iceland, but the number of overnight stays fell by 15%.

“You can see that there’s a decrease in overnight stays, which means that people go less out to dinner. It also means that people are spending less money, and people are looking for cheaper options than restaurants, and we can see that this has an impact on the whole business,” Skúlason says.

He says it’s a negative development that the number of overnight stays is decreasing.

“It is the policy of both the government and the industry that tourists stay longer and spend more money. This is a concern, not just for the industry but also for the value society creates from the industry if this trend continues.”

Jóhannes Þór Skúlason.

Jóhannes Þór Skúlason.

Need more focused marketing

Skúlason also says that Iceland has become a far more expensive destination than neighboring countries, as countries like Norway and Finland have lower inflation and costs, and people are therefore more likely to go there.

He wants more focused and tighter marketing that increases dialogue with consumers. It is a powerful tool to have a say in who comes to Iceland and how long they stay.

He adds that neighboring countries have strong marketing but nothing has happened in this regard in Iceland since the Covid-19 pandemic. Then Business Iceland (Íslandsstofa) embarked on the campaign “Let it Out”. The campaign was about inviting tourists to Iceland to relieve the stresses associated with the pandemic.

“Since 2022, no special funding has been allocated to consumer marketing, and this situation is partly because of that,” he says.

Marketing campaigns are a powerful tool to attract customers in this very competitive market.

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