Eruption Could Cause Vast Losses to Iceland’s Economy Skip to content

Eruption Could Cause Vast Losses to Iceland’s Economy

By Iceland Review

An estimated ISK 9-11 billion (USD 70-86 million, EUR 52-64 million) increase in foreign currency revenue from the Icelandic tourist industry—based on an assumed six to seven percent growth in the sector this year, as has been the case in previous years—has now been upset by the eruption in Eyjafjallajökull.

Traveling in Iceland. By lake Mývatn. Photo by Páll Stefánsson.

To put that into context, Erna Hauksdóttir, managing director of the Icelandic Travel Industry Association, estimates that the foreign currency revenue from the sector was ISK 155 billion (USD 1.2 billion, EUR 900 million) in 2009, which was 20 percent of the national economy’s total foreign currency revenue, Morgunbladid reports.

The most optimistic forecasts even predict that the foreign currency revenue from the tourist industry would approach ISK 200 billion (USD 1.6 million, EUR 1.2 million) this year.

The Icelandic airlines, Icelandair and Iceland Express, are looking at a 75 percent drop in bookings compared to what the situation usually is at this time of year. If bookings don’t pick up, the Icelandic tourist industry as a whole could suffer significantly.

The airlines have already suffered several hundred million ISK in losses since the eruption in Eyjafjallajökull began because of disruptions to flights.

“We have received many cancellations, especially in April and May. People don’t expect to be able to reach their destinations because of airport closures. There have also been some cancellations for the summer,” said managing director of Icelandair Birkir Hólm Gudnason.

“New bookings are now about a quarter of what they were before the eruption and a quarter of what they are supposed to be at this time of year,” Gudnason said.

Even though the outlook may be bleak, Hauksdóttir emphasizes that it is impossible to estimate with any certainty how extensive the financial damages will be to the tourist industry because of the Eyjafjallajökull eruption.

“People are working on strategies to turn the cancellation of bookings around so that the summer will be fairly good. We have no other choice. We are not looking at the increase in revenue that we were hoping for,” Hauksdóttir said, adding that it would be a victory for the tourist industry if the revenue would remain similar as to what is was in 2009.

Tourism companies and state-run institutions are now planning a marketing initiative for when flights will be back to normal. “It will take a lot of effort to let the world know that the situation here is alright,” Hauksdóttir said.

People are also considering how to make use of the attention currently directed at Iceland. “There are opportunities everywhere. The eyes of the world are currently on us but that never lasts long and we have to take advantage of that,” Hauksdóttir explained.

“We must put funds into marketing Iceland as a living destination where people can look at the evidence of a volcanic eruption and witness the earth being shaped,” agreed Hildur Ómarsdóttir, manager of the sale and marketing division of Icelandair Hotels.

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Click here to read more about the eruption in Eyjafjallajökull.

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