The Impact of Tourism in Iceland

Transcription

1 The Impact of Tourism in Iceland Dr. Ásgeir Jónsson Associate Professor, Department of Economics University of Iceland

2 Economic impact

3 A paradigm shift In 2012 there was a paradigm shift in Icelandic tourism In three years the number of foreign visitors has almost doubled, from 560 thousand in 2011 to about one million in The underlying growth seems to be 20-25% in each year. The shift is not caused by any single reason Increased name recognition/brand awareness of both Iceland and Reykjavík caused by a financial collapse, volcanic eruptions, Hollywood movies shot on location, Björk, and etc. Word of mouth praise from past visitors, leading to more visits. A great increase in flight availability now Easy Jet flies to Iceland. The Tourist sector is becoming a leader in Iceland s economy In the labor market as source of new jobs. In the currency market, as the main source of new export revenue In the housing market, as a new demand for small, centrally located apartments.

4 A doubling in three years The number of foreign visitors, y = 6173,6e 0,0746x

5 A new growth territory, 20-25% The growth of foreign visits, from year to year 30% 25% 20% 15% 10% 5% 0% -5% -10%

6 Sívaxandi hagræn örvun frá ferðaþjónustu - Fjölgun ferðamanna á hverju ári í þúsundum

7 Foreign trade and currency market

8 10% aukning kaupmáttar á einu ári Íslandsmet í nánd? - Ársfjórðungslegur vöxtur einkaneyslu , þriggja fjórðunga hlaupandi meðaltal

9 Bara launahækkanir engin framleiðni? - Launakostnaður og framleiðni 2008 til 2015 og spá Seðlabankans fram til ,00 8,00 6,00 4,00 2,00 0, ,00-4,00-6,00 Launakostnaður á framleidda einingu Framleiðni 9

10 1. ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj ársfj Með hærri launum og stígandi krónu, tapast samkeppnishæfni - Raungengi, á mælikvarða launa og verðlags ,0 140,0 120,0 100,0 80,0 60,0 40,0 20,0 0,0 Miðað við verðlag Miðað við laun 10

11 Ferðaþjónusta er nú leiðandi í gjaldeyrissköpun - Vöru- og þjónustujöfnuður, milljarðar króna á hverjum ársfjórðungi Þjónustujöfnuður Vöruskiptajöfnuður

12 Viðskiptajöfnuður 5% af landsframleiðslu - Viðskiptajöfnuður sem hlutfall af landsframleiðslu

13 Krónan eru undir þrýstingi til styrkingar - ISK/EUR frá 2009 til ,0 180,0 170,0 160,0 150,0 140,0 130,0

14 100 milljarða svigrúm til erlendra fjárfestinga Greiðslujöfnuður er bókhaldsjafna fjárstrauma inn og út úr hagkerfinu: Viðskiptajöfnuður + fjármagnsjöfnuður = greiðslujöfnuður Sterkir hagrænir hvatar halda greiðslujöfnuði á núlli þannig að útflæði og innflæði nettast út og fjármagn fossar hvorki inn né út úr hagkerfinu. Þess vegna spegla fjármagnsjöfnuður og viðskiptajöfnuður hvorn annan; afgangur annars þeirra leiðir til halla á hinum og svo öfugt. Þrátt fyrir ofurvöxt ferðaþjónustu hefur viðskiptajöfnuður haldist stöðugur það er 5%af landsframleiðslu sem er um 100 milljarðar. 5% viðskiptaafgangur gefur svigrúm fyrir 100 milljarða útflæði á fjármagnsjöfnuði vegna erlendra fjárfestinga innlendra aðila.

15 Regional impact

16 Tourism is essentially a service industry Large population centers simply have an advantage in services, with regard to quality, diversity and even price. Therefore, money from tourism is mostly earned in Reykjavik or other large population centers where you can actually buy something. Indeed, in many parts it is almost impossible for tourists to spend money on other things than gasoline, hamburgers and perhaps accommodation. Foreign visits to the rural areas are confined to the summer months and can thus not create a stable year long employment. Moreover, since tourists most often travel on foot their activities are very clustered within the cities they dwell. The center of the tourist growth is now 101 Reykjavik the downtown which has become a new hub for economic activity and export earnings. Thus, the downtown long suffering from suburbanization and re-direction of commerce into malls, has been re-vitalized 16

17 Tourists spent their time in the rural areas but their money in Reykjavik Days spent in Reykjavik % of total days spent in Iceland Earned income from tourism in Reykjavik % of total earned income from toursm in Iceland 17

18 Only 11% of earned income from tourism is not spent in close approximity to either Reykjavik or Akureyri the main population centers of Iceland 5% 11% 8% Reykjavik < 1 hourfrom Reykjavik Akureyri & Eyjafjörður 76% other areas 18

19 Earned income ISK from each night spent on paid accommodation of a foreign visitor (figures from 2003) Other areas < 1 hour driving dist. from Akureyri < 1 hour driving dist. from Reykjavik Akureyri Reykjavik

20 A new promise for rural areas? The population of many rural areas in Iceland has been shrinking very rapidly for the past few years. This is particularly true for townships in the East, West (Vest fjords) and North, which lie at sea and are surrounded by mountains. For townships in these parts of country a 10-30% total population decline since 1980 is not uncommon. In these areas, the local service economy has collapsed. partly due to better transportation and better connection to large population areas partly because population has gone below the threshold needed to sustain commerce and services. Although, Reykjavík is taking the largest slice from the tourist revenue, there is plenty to go for the other smaller players. The service sector is re-vitalizing the rural service economy with new demand for groceries, food, and etc. This is particularity observable along the main roads leading south-east and north-west from Reykjavík, which are the most frequented by tourists. 20

21 Future challenges

22 The benefits of scale The population of Iceland is almost too small to support the infrastructure and specialization needed for a developed economy. Foreign visits have similar effect as a population increase, without the welfare costs. The main thrust of the taxation is Iceland indirect, both through a very high value-added tax and levies alcohol and gasoline which one has to pay to use the road system. Iceland would also be unable to maintain an international airport with the current flight frequency or number of destinations without the foreign visits. So, for the growth of the tourist industry has been almost like a free lunch for the state since the foreign visitors are just the infrastructure that is already in place and pay a lot of taxes. That might be changing. 22

23 The end of free lunch in tourism The tax revenue from tourism is collected centrally however the costs are incurred locally. May local governments are feeling strained by an increase in population that is not really paying any local taxes. A new cost-sharing is needed between central and local government. Iceland s delicate natural wonders can only sustain a limited number of tramplers that limit has been reached in some areas Many traditional rights in Iceland, like a free and unbridled access to the highland are under threat for both safety reason and natural preservation. With 1 million visitors Iceland s infrastructure has reached its limits. For continued growth, very expensive investments are needed with a larger airport, improved roads and extended security in the highland and etc. Iceland s own inhabitants are getting increasingly more irritated by the increased number of visitors. The foreign tourist are crowding out Icelanders from many areas of their own country.

24 Conclusion

25 The Pros and Cons The surge in tourism in 2012 came at very favorable time Icelandic economy had shrunk considerably after the banking collapse of 2008 and the export industry was stagnant despite a much lower currency. The tourist sector has been leading the economic recovery in past three years. The increased export revenue came at little cost All the infrastructure was already there. Now, it s the end of free lunch After the 1 million mark, there is a great need for infrastructure investments and reorganization of various sorts. The tourist sector can not be a future growth leader for Iceland. Most of the jobs created are low-paying, low skill service employment that is being met by importing cheap foreign labor. Iceland can not welcome an unlimited number of tourists as it will create burden for the population as well as the precarious nature. In not so distant future, Iceland will probably place limits to the growth of the tourist sector. 25