REYKJAVIK, Iceland—The dramatic increase in tourism and the hospitality industry in Iceland in recent years is focused mostly on Reykjavik, with nearly all travelers arriving in Iceland via the country’s principal international airport 30 miles southwest of the capital, according to sources.
Icelandic hoteliers who participated in the “Hotels! Operations, sales and marketing” panel at the recent Iceland Tourism Investment Conference & Exhibition analyzed recent changes and discussed what needs to be done to create a sustainable industry in a nation with a small population and major tourism sites situated in remote locations.
“Tourism needs to be more than just in the city center of Reykjavik,” said Ingibjörg Ólafsdóttir, GM of the Radisson Blu Saga, which is located in the heart of the capital.
Two things do seem to be changing, sources said. Demand is increasing in formerly underperforming seasons—including winter—and supply is slowly increasing in the hinterlands.
Panelists said that the road system to the hinterlands needs to be improved, although that does worry suppliers who sell Iceland’s remote beauty and geothermal splendors.
Panelists also said that the country’s sharing economy providers have played a role in bridging the demand gap during the current period of hotel construction, but admitted they could be seen as a liability going forward.
“We see supply not as a threat but at the moment beneficial, as we get to expand the product range, price range and quality,” said Hildur Ómarsdóttir, director of marketing and business development at Icelandair Hotels.
During the panel, Ómarsdóttir announced his company has completed a three-property partnership with Hilton Worldwide Holdings to open a Canopy branded hotel and two soft-brand Curio properties. All three will be in Reykjavik.
“There remains a pyramid in regards to revenue per available room, with Reykjavik having occupancy at 90% in the summer, 85% at other times,” said Ester Björnsdóttir, sales and marketing manager at Keahotels. The company currently has one property in Akureyri, a town in northern Iceland that is the fourth largest in the country, albeit with a population that only exceeds 18,000.
Ómarsdóttir added the Hilton deal was about adding to the knowledge base and having access to a loyalty program and brand distribution.
“Iceland’s current success has come about because many of us have been preparing over many years, but now is the right time to start changing what we are selling,” Ómarsdóttir said.
Domestic chains were looking at “putting more and more dots around the country,” said Ásmundur Sævarsson, director of sales and marketing at Íslandshótel, which currently has five properties, one of which is in the northeast of the country.
“We’re really focussed on the countryside, which is fun but challenging,” Sævarsson said. “The challenge to have wholesalers and others invested in these products, especially in the north and the west. Winter is a challenge, even in Akureyri, which has infrastructure.”
Pricing and talent
Panelists also discussed how rates at Icelandic hotels should keep pace with increasing inbound numbers.
“Now, it is about taking care of your own property and sell what you have in your surroundings,” Sævarsson said. “The strong demand we’ve seen in winter I think caught us by surprise, and pricing has been slow to react, and if we did expect it a little, it happened far faster than we expected.”
Keahotels’ Björnsdóttir said hotel performance during winter has improved because of more hard work by Icelandic hoteliers.
“A lot of effort has gone into this season, but it is delicate, so how much can we raise rates without hurting the floor,” Björnsdóttir said. “Getting staffing right during that season is another concern. This is not a problem in Reykjavik.”
“We see this season as an opportunity to bring in new talent, especially in (food and beverage), as guests probably spend more time in the hotels during this season,” Ómarsdóttir said.
Panelists agreed more effort was needed to sell incentives and meetings, as well as to promote hospitality in Iceland as a career, which might mean attracting talent from outside of the country.
“Hotels need to be clear in their strategy concerning segmentation. … We are far behind other countries in terms of data,” Björnsdóttir said. “We are good in occupancy and RevPAR, but in terms of profitability, the information is not out there.”
Alternative accommodations in Iceland
As for the threat from sharing economy providers, the panel participants heavily criticized Airbnb, saying the company had raised housing prices, which can be felt acutely in a country with a population of fewer than 350,000.
“They do not do destination marketing, and while they might share the results, they certainly do not share the costs,” Ómarsdóttir said. “That said, they are here to stay, so we should find a way of working (with) them.”
“We are constantly told that as hoteliers we should not be showing greed at this time of high demand, but Airbnb does not seem to be under the same constraints, and they are not fulfilling legal requirements either,” Björnsdóttir said.