13 Jun Jewel of the North Atlantic shines as crisis passes
Lilja Dögg Alfreðsdóttir, Minister of Tourism, Trade and Culture, Iceland, talks about the nation’s fast-recovering tourism sector and key areas of focus the ministry is looking at to further attract visitors to its shores.
What key areas is the Ministry of Tourism, Trade and Culture targeting to develop the country’s offerings?
The ministry encompasses the entire heart and soul of the country. Historically, one of Iceland’s first export products were actually manuscripts of the old sagas. In the middle of the 12th and 13th century, we had talented writers recording the history of the Norwegian kings and Nordic mythology. If the sagas had not been written here in Iceland in the 13th century, we would not have Thor, Odin, Frigg or Freya. Iceland has a strong background in literature and has always had a strong focus on its language. Icelandic is the Latin of the North. It used to be the language that was spoken throughout the entire Nordic region apart from Finland. We place a strong emphasis on connecting our historical culture to modern times. The main movers and shakers in Iceland’s independence movement were writers and poets that became politicians.
Iceland experienced an incredible boom in the tourism sector before the pandemic. We quickly went from having 500,000 tourists per year to 2.2 million tourists. The tourism industry became the largest export revenue in Iceland’s economy. We are big exporters of fish, which used to be the largest pillar of our exports. We are also rich in energy and produce aluminum. Tourism has become the third-largest export pillar of our economy. New sectors like biotechnology and biopharmaceuticals are playing an increasingly important role.
One of our key priorities for the coming four years is going to be music. Iceland is rich in musicians. The world knows Björk, who is one of the most creative people in the world. However, we have others, such as Of Monsters of Men and the incredible Laufey Lin, that have created a huge following worldwide. We also want to increase export revenues from the creative industry in areas such as arts, gaming and design. Another key focus will be on the film industry, which has grown tremendously and is very much connected to tourism.
Visiting tourists often say that their reason for coming to the country is because they saw a film produced in Iceland and they were stunned by the country’s natural scenery. The film industry will play a huge role in attracting investment. The government has formed a steady roadmap to promote the film industry until the year 2030. It is a very focused and forward-looking plan. It is based on making the local industry more competitive, which means increasing rebates for the film industry in Iceland. We have invited large companies from the U.S. We have also increased the level of focus on this industry in education.
Additionally, we created a specific investment fund throughout the pandemic to assist our film industry. We had very low incidences of the virus, and companies could continue shooting many films in Iceland during the crisis. It is important to connect the world of arts to tourism. In the future, there will be a greater focus on tourism based on culture.
What kind of development projects is Iceland focused on to develop its tourism industry?
We are looking at enhancing infrastructure, which includes upgrading the Keflavik airport, something requiring investment. We want to up international destinations in Iceland, such Egilsstaðir in the east and Akureyri in the north. Both places are magical and offer completely new gateways into Iceland. We have some international flights from Akureyri with a carrier called Niceair, which is promising, with a lot of domestic and international demand. We are optimistic for the new tourist season. Numbers are going up and bookings in hotels and the countryside look positive. Airline carriers are also reporting positive numbers. There are downsides caused by the geopolitical tension taking place in Ukraine, with the largest factor affecting the tourism industry in Iceland being the price of fuel oil needed for flights. We are over the pandemic and many people want to travel. Iceland is a fantastic destination in the summer because we have so much to offer.
What impact has the COVID-19 pandemic had on Iceland’s tourism sector?
The tourism industry was eight percent of our gross domestic product in 2019 and is now currently only three percent. The two million tourists in 2019 dropped to 700,000 in 2021. Luckily, we have been running sustainable economic policies throughout the last ten years. When we entered the pandemic, government debt was low, only about 22 percent of the country’s gross domestic product. We built a successful economic bridge throughout the pandemic. We assisted the tourist industry through many economic measures and facilitated loans from the banking sector and the government. We supported the cultural industry through specific funds aimed at helping independent artists, theaters and music halls. We targeted being on par with pre-COVID times. Hopefully we will be in a better position because we saved for rainy days. We invested a lot in infrastructure throughout the pandemic. One of the key things we were looking at was the gross domestic product equation. We want to increase investment and use public-private partnerships for continuation of our infrastructure projects in Iceland.
We have seen a lot of investment in the tourist industry in recent years. However, we must be realistic. Our tourism industry took a serious hit. It was not creating necessary revenues for the last two years to make back investments in new hotels and infrastructure. Short-term debt has increased. Going forward it will take some time to become sustainable again. It will require a joint effort from the industry and our financial system to make necessary adjustments. That said, Iceland has an extremely fascinating, forward-looking economy that aims at having the highest gross domestic product per capita. We are focused on establishing a creative economy that welcomes people that want to visit, work and contribute to one of the most competitive places in the world.
What recent shifts have you seen in terms of international markets keen on entering Iceland for tourism purposes?
We are seeing increasing numbers of tourists coming from the U.S. One reason is our many direct flights from various cities in the country. American tourists can take advantage of the ease in travel to and from Iceland. The country is only six hours from Seattle and five hours from New York and Boston. It is often easier to travel to Iceland than to other cities within the U.S. The number of tourists from the U.S. are expected to increase still. We are also going to see Germans coming, which used to be the number one nation visiting Iceland. In addition, there will be a rise in tourists coming from the U.K. There is a demand for traveling; people have not been traveling a lot throughout the pandemic.
How has Iceland’s tourism sector contributed to lowering carbon emissions?
We are looking at having Iceland’s tourism sector based on green energy. We will be one of the first countries in the world to have more sustainable tourism taking place because of the abundance of renewable energy in Iceland. We are rich of hydro and geothermal energies. We are also going to experience a big shift through automobiles and flight carriers in Iceland changing their energy resources. This will be our greatest contribution regarding our ambitious climate policy.