Although 2011 was not as bad as 2009, the Icelandic economy still posted negative increase. Icelanders were careful with their outbound travel budgets. On the other hand, the national of EU nations such as Ireland, Greece, Spain and Portugal sent shockwaves around the world. As Iceland draws the bulk of its tourism from EU nations, the national of the EU economy mostly affected inbound tourism.

 

The Icelandic krona, the local currency, appreciated against the euro. Thus, inbound travel from EuroZone nations became additional expensive while outbound travel to EuroZone nations became less expensive. Similarly, the depreciation of the krona against the US dollar made inbound trips to Iceland less expensive.

 

The eruption of Eyjafjallajökull affected tourism arrivals in March and April. Ash clouds over Iceland and Northern Europe halted flights from a lot of European airports. Some nations benefited as tourists had to prolong their stays in certain destinations while others lost out as tourists could not travel to these destinations.

 

Due to high internet penetration in Iceland, internet sales increase outperformed in general sales increase in the transportation and travel retail categories. This unique characteristic of Iceland’s tourism industry makes it attractive to internet retail portals inclunding low-cost carriers which prefer internet sales to reduce fare costs.

 

Due to the depreciation of the krona against the US dollar, Iceland has become an attractive destination for US tourists. There are only a few airlines which serve this market. Due to increased competition between carriers, outbound travel will as well benefit from reduced air fares.

 

Iceland’s economy has been hit extremely hard by the world financial crisis of the major reasons for this is the comparatively small size of the central bank, which has been unable to implement policies to alleviate high consumer debt and a slowdown in spending. This has as well impacted negatively on Iceland’s currency, which lost approximately 44% of its price in 2008. However, the devaluation of the currency had a positive effect on Iceland’s travel and tourism industry. Over the past year, as the currency has devalued, there has been an influx of North American and European tourists, which has actually kept the Icelandic travel and tourism industry afloat during this harsh economic period.

 

 

The government is aiming to promote sustainable ecotourism. This niche market has been very lucrative for Iceland’s travel and tourism industry, which has grown significantly through a focus on the conservation of various natural resources. Whale watching continues to be part Iceland major tourist activities, along with inland nature-related tourism, such as bird-watching, off-road trails and mountain climbing. Consumers and tourism operators seem to be buying into this eco-friendly tourism policy, with a lot of emerging niche businesses pursuing this direction.

 

 

While the number of businesses has increased in certain segments of the market, it is likely with the current financial crisis that consolidation will become a trend in the next. As businesses find that they are not able to cope with the lack of tourists, a lot of will follow the merger and acquisition route in order to remain in the market. This is not a trend that is specific to Iceland or the travel and tourism industry, but is a world phenomenon that is being experienced due to the economic recession. However, with new businesses expected to open in certain sectors of the market over the estimate period, the in general number of businesses is likely to remain largely unchanged.

 

 

On-line bookings increased significantly in Iceland’s travel and tourism industry over the review period. The Internet has become a way of life for a lot of Europeans and North Americans, the areas which make up the majority significant proportion of Iceland tourists base. As the potential of the Internet continues to be realised by companies, a lot of of them continue to improve their on-line facilities. This includes a number of features ranging from better data and data to better security and payment systems.

 

 

Most of the travel and tourism industry in Iceland is expected to remained fairly static over the estimate period, as the economy moves only slowly out of recession. The country is not expected to recover to previous levels until the end of the estimate period.