The Icelandic travel and tourism sector's review-period (2008-2012) performance was adversely affected by the country's slip into recession in 2008. However, despite the volcanic eruption at Eyjafjallajökull in 2010, international and domestic tourism activity increased overall.
Domestic tourist volumes rose at a review-period CAGR of 1.89% while international arrivals increased at a CAGR of 7.60%. According to the World Travel and Tourism Council (WTTC), in 2012, the sector accounted for 19.5% of Icelandic GDP and 20.9% of total employment.
Iceland also recorded an increase in the number of visitors from emerging markets such as China and Russia. According to the Icelandic Tourist Board, between January and September 2013, the number of Chinese tourists through Keflavík International Airport increased at a rate of 24.4%, while the number of Russian visitors increased at a rate of 54.3%. In April 2013, a Free Trade Agreement (FTA) was signed between Iceland and China; it is expected to further strengthen trade and tourism ties between the two countries.
Growth in the volume international departures from Iceland is expected over the forecast period. The expected growth can be attributed to the increasing air capacity and better connectivity to key destinations. For example, Iceland Air launched services to Anchorage in Alaska during the summer months (May-September) of 2013. The company also increased the frequency of its flights on key routes. Gatwick-Iceland was increased to four times a week and London-Iceland was increased to three times a week.
The increasing number of tourists and growth in car rental business led to the entry of new companies into the market. In August 2013, Red Car Rental, a part of Iceland's leading travel network Kynnisferdir, was launched. In addition to offering a brand new fleet of cars, the company also offered a launch discount of 10% on pre-paid bookings to attract customers.
Icelandic tour operators have benefitted from the shooting of films and television series' in the country. For example, in 2013, Iceland Travel, a leading Icelandic tour operator, launched Game of Thrones'-themed tours from the UK to Iceland. The tour, which takes travelers to the filming locations of the Game of Thrones television series, will be on offer between 1st October 2013 and 30th April 2014.