Tourism Not Fuelling Inflation, Says Tourist Association

The head of the Icelandic Travel Industry Association (SAF) insists that the constant influx of tourists into Iceland is not fuelling the country’s current inflation levels. Inflation in Iceland was 6.79 percent in January 2024.

SAF managing director Jóhannes Þór Skúlason told the national broadcaster that the industry is expecting a slowdown ahead. Turnover in 2023 amounted to 921 billion Icelandic krónur, up 21 percent from 2022 when the industry made 759 billion krónur.

While Jóhannes vehemently denies that tourism is contributing to inflation, the rise in tourism coincides with a 30 percent increase in real estate transactions. Airbnb market data from rankings website AirDNA found that short-term rental registrations were up 70% in 2023 over 2022 (in step with the aforementioned tourism increase), contributing to the housing crisis throughout Iceland and the skyrocketing cost of living in Reykjavík.

Contrary to SAF’s assertions, Finnbjörn A. Hermannsson, president of the Icelandic Confederation of Labour, told Bloomberg in January that, “Tourism has been creating inflation and the general wage earner is paying for it.”

Moreover, a 2023 report from the Central Bank concluded that “The rapid growth of tourism has given rise to discussion of the crowding-out effect from the sector and whether the increase in tourist numbers should be limited with higher fees and taxation. The tourism boom has therefore contributed to low unemployment and put considerable pressure on other infrastructure, including the housing market, as a majority of tourism employees are foreign immigrants.”