Tourism became Iceland’s most important export industry after the financial crisis in 2008. In 2017, tourism made 42 per cent of the total exports; a number that can be compared to other industries like fisheries (17% of total exports) and aluminum (16% of total exports). International tourist numbers rose from approximately 500.000 in 2010 to 2.3 million in 2019 (Table 1), with an annual increase of 19-39 per cent. Compared to the international tourism of up to 2.3 million visitors, the domestic market of 376.000 inhabitants in Iceland

Statistics Iceland, 2022a.

is relatively small. Despite that, domestic travel has been a steady part for a large proportion of the population for a long time as the ratio of domestic travellers has remained stable. It is also worth noting that domestic travel did not decrease significantly at the same time as inbound tourism was booming. The total number of outbound trips of Icelanders has increased every year from 2009 through 2018. During the pandemic, the number of outbound trips decreased dramatically by 69 per cent, and the number of outbound trips had never been lower.

Table 1 International and domestic tourists in Iceland, number of domestic trips and overnight stays 2009-2021. (Source: Gallup, 2022 and Icelandic Tourist Board, 2022a; 2022b).

According to the Icelandic Tourism Satellite Accounts’s preliminary results, the share of tourism in Iceland’s GDP was 4.2 per cent in 2021, compared to 3.6 per cent in 2020.

Statistics Iceland, 2022b.

Between 2016 and 2019, before the COVID-19 pandemic, the average share of tourism in GDP was 8.1 per cent. The total internal tourism consumption, inbound and domestic, was 556 billion ISK in 2019 at current prices (Fig.1). The expenditure or consumption of inbound tourism was approximately 385 billion ISK, or about 73 per cent of the total internal tourism expenditure. Inbound and domestic tourism consumption decreased considerably in 2020. The share of domestic tourism expenditure of the total internal tourism was 55 per cent in 2020, and has never been higher since the beginning of the time series in 2009. In 2019, the domestic tourist expenditure was 31 per cent of the total tourist expenditure, 58 per cent in 2020, and 46 per cent in 2021. The share of domestic tourism in internal tourism consumption grew significantly in 2020 and 2021 compared to 2019, especially in accommodation and food and beverage (Fig.3). Domestic tourism expenditure was 149 billion ISK in 2021, a 24 per cent increase from the previous year. In comparison, the outbound consumption of Icelanders is normally higher than domestic consumption; 185 billion ISK in 2019 but decreased during the pandemic to 69 billion ISK in 2020, and 98 billion ISK in 2021, parallel to fewer outbound trips.

Figure 1. Internal tourism consumption 2009-2021. (Source: Statistics Iceland 2022b).

Figure 2. Internal tourism expenditure by type of tourism 2019-2021. (Source: Statistics Iceland 2022b).

Figure 3. Domestic tourism expenditure. (Source: Statistics Iceland 2022c).

Statistics on the expenditure of domestic tourists are based on estimates and are generally more difficult to estimate than the expenditure of foreign tourists.

Statistics Iceland, 2022b.

Thus, domestic tourists are more likely to use their own vehicle for travels and stay in privately-owned housing, which makes it harder to distinguish their private consumption of inheritance from the private consumption of daily life. No data is available on the significance of same-day visitors in Iceland.

In total, there were 8.4 million overnight stays in Iceland in 2019, of which the share of domestic tourism was 13 per cent or approximately 1.1 million (Fig.4). A decade before, in 2009, the domestic tourism share in overnight stays was 29 per cent and slowly decreased year by year, as the inbound tourism overnight stays increased. The share of domestic tourism was even throughout 2019, but in April 2020, the pandemic’s impact on overnight stays was visible in the sharp decline in inbound tourism overnight stays, and the domestic share increased (Fig.5). During the pandemic, the share of domestic overnight stays increased by 35 per cent between 2019 and 2020, and by 32 per cent between 2020 and 2021. The number of domestic overnight stays during the summer months, June-August 2015-2019 was approximately 550.000-570.000 nights. During the Covid summers of 2020 and 2021, the number of domestic overnights doubled to 1-1.1 million in total. The offical data on overnight stays in Iceland does not include information on overnight stays in privately-owned summer houses or cottages, nor houses owned by trade unions, NGOs, or companies. Unions in Iceland have, for decades, offered their members low-cost rental vacation homes during their holiday. The demand for these vacation homes is usually high.

Figure 4 Overnight stays in Iceland 2005-2021. (Soiurce: Statistics Iceland 2022b).

Figure 5 Share of domestic tourist in overnight stays in Iceland. (Source: Statistics Iceland, 2022e).

The share of regional domestic overnight stays is not equally distributed. The Capital area and South Iceland each had 26 per cent of domestic overnight stays in 2019, 18 per cent of domestic overnights stays were in North-east Iceland, and a smaller share of overnights was in other regions (Fig.6). During the pandemic, the share of overnights decreased significantly in the Capital area, but increased in Northeast, East, and South Iceland. The difference in the share of the domestic market may be even greater between municipalities. For instance, the North-Icelandic municipality of Akureyri, the largest town outside the more populated southwest corner with 19.000 inhabitants, has long been one of Iceland’s most popular domestic destinations. In places like Akureyri, seasonal fluctuations in overnight stays of inbound tourism can be considerable, although it has decreased in the pre-pandemic years. Even if domestic overnight stays in Akureyri have been considerably fewer than of international tourists, their numbers have remained stable, especially in late-winter-season/early spring, with domestic overnight stays ranging from 5 000 to 6 000 each month.

Bjarnadóttir, 2021.

Stakeholder interviews confirmed that in some cases, like in the North or in the Westfjords, domestic winter tourism can decrease seasonality fluctuations and make a significant difference for tourism companies that may be able to provide services all year-round.

Figure 6. Share of regional domestic overnight stays 2019-2021. (Source: Statistics Iceland 2022e).

The Icelandic border remained open throughout the pandemic, although with some restrictions. In March 2020, Iceland implemented temporary travel restrictions until July, imposed for the Schengen Area and the European Union, where foreign nationals - except EU/EEA, EFTA or UK nationals - were not allowed to enter Iceland unless they could demonstrate that their travel was essential.

Government of Iceland, 2020.

Quarantine measures for up to 14 days and PCR-testing was implemented for international arrival.

The Directorate of Health and The Department of Civil Protection and Emergency Management, n.d.

Rules on quarantine, isolation, and screening at the border changed concurrently, as the pandemic and vaccinations progressed according to regulation no. 1100/2021.

As of February 2022, all infection prevention rules for COVID-19 have been lifted at the Icelandic border, regardless of tourists’ vaccination status. From January through June 2022, approximately 640.000 international tourists arrived in Iceland, which is 92 per cent of the total number of inbound tourists the year before.

Icelandic Tourist Board, 2022.

During the summer of 2022, domestic overnight stays were 792.000, which is lower than the year before, but more than in 2019.

Statistics Iceland, 2022e

However, the share of domestic tourism in the total overnight stays this year is slowly decreasing (Fig.5). In July 2022, the share was almost the same as in July 2019. Data on tourism consumption in 2022 will not be available until 2023. Icelanders have been eager to travel abroad during this year; from January to August 2022, the total number of outbound trips was 380.000.

Icelandic Tourist Board, 2022b.

To date, target audience analyses have not been carried out in the domestic market and tourist profiles have not been developed. Since 2009, the Icelandic Tourist Board has conducted surveys in January among Icelanders on their domestic and international travels over the past year and their travel intentions the coming year. The surveys provide insight into the domestic market, and the following section is based on results from the years between 2019 and 2021.

Gallup, 2022.

Surveys show that every year, many Icelanders travel both abroad and domestically. Around 86 per cent of the population typically travels domestically every year. Approximately 71 per cent of the population travelled both within Iceland and overseas in 2019 (Fig.7). Before the pandemic, the average number of outbound trips per year was 2.6 (Fig.8). The average number of outbound trips dropped to 1.8 during the pandemic. Since 2009, the percentage of Icelanders who only travelled domestically has dropped from 48 per cent to 14 per cent in 2019. In 2020, 64 per cent travelled only within Iceland. Most domestic trips were for holidays, or outings for hobbies or leisure. Most domestic trips were taken during the high season, or in June, July, and August (Fig.9). Comparatively, more domestic trips were taken in July 2020 and 2021 than in 2019. The average number of day trips increased for almost one trip a year, from 4.1 in 2019 to 6.2 in 2021.

Figure 7. Travels in Iceland or abroad. (Source: Gallup, 2022).

Figure 8 Average number of trips. (Source: Gallup, 2022)

Figure 9. In which month was the domestic trip taken? (Source: Gallup, 2022).

In 2019, North Iceland was the most visited region by domestic tourists, and the region has had that status for years (Fig.10). However, in 2020, South Iceland was by far the most popular region. The ratio of visitations grew in all regions in 2020 and 2021 compared to 2019. The smallest growth was in the Capital area. Icelanders spent on average 14.0 nights on their travels in Iceland in 2019 (Fig.11). At the same time, the average number of trips per year decreased between 2019 and 2020, and the average domestic stay was prolonged. In 2021, the average number of overnight stays was 17.1 nights and has never been higher. Findings on the length of stay for each region show that Icelanders spent more nights in South Iceland and West Iceland in 2020 and 2021 than in 2019. The average number of overnight stays was steady in North Iceland and the Westfjords. Fewer nights were spent in the Capital area and Reykjanes in 2020 compared to 2019 and 2021.

The survey doesn’t ask about accommodation options used by Icelanders. In 2020, 39 per cent of Icelanders stayed overnight in recreational housing/cottages owned by unions, NGOs, or companies, and the average length of stay was 2.5 nights; in 2021, the ratio was 47 per cent for 2.9 nights on average. Around 46 per cent of Icelanders stayed overnight in privately-owned cottages for 5.9 nights on average, and the ratio was 49 per cent for 5.5 nights in 2021. No data is available for 2019, and no further data is available about the tourism behaviour of those guests.

Figure 10. Regions visited by domestic tourists. (Source: Gallup, 2022).

Figure 11. Average number of domestic overnight stays. (Source: Gallup, 2022).

General outdoor recreation was popular among Icelanders during their domestic travels in 2019, 2020, and 2021, but more than half of the respondents engaged in outdoor recreation, hot and cold baths, hiking, cycling, and mountain biking (Fig.12). The recreation that Icelanders paid the most for during their domestic travels has consistently been nature baths and swimming pools, followed by museums and exhibitions, with no exception in 2019-2021.

Figure 12 Recreational activities paid for by domestic tourists while travelling. (Source: Gallup, 2022).

No analysis has been made on the future of the domestic market in Iceland. Nevertheless, stakeholder interviews revealed some ideas about potential future outlooks. All stakeholders agreed that the domestic market was small, albeit important to the tourism industry, but may not have received the attention it deserved in recent years when everyone’s attention was on the booming inbound tourism. Everyone agreed that the COVID-19 pandemic has marked a turning point in how the domestic market is perceived. However, some of the stakeholders pointed out that it is still too early to predict the future since the tourist behaviour, consumption, and bookings of both inbound and domestic tourists are still not as they were before the pandemic. During the pandemic, countless inbound tourism bookings were moved from 2020 and 2021 to the year 2022. According to the stakeholders, some Icelanders willing to travel domestically during the summer of 2022, didn’t realise that due to the increase in inbound tourism, they had to book their domestic travels in advance. One of the lessons learned was that domestic tourists will need to plan further ahead than usual when booking their future holidays in Iceland. Adding to that, the stakeholders explained that weather is an important factor for the domestic market; thus, there is no way to say where domestic tourists will go until they know what the weather is like. Another factor is the exchange rate of the Icelandic krona, which greatly affects whether Icelanders travel domestically or not, and if they do, and how many outbound trips they take.

Some of the stakeholders pointed out that many segments of the domestic market are unknown. For instance, the travel behaviour, preferences, and consumption of domestic tourists in second homes or holiday homes owned by the unions is under-researched. The same goes for domestic tourists travelling to the Capital area and many other areas. The interviewees were convinced that with further knowledge about the different segments of the domestic market, it would allow further product developments to take place and better utilise opportunities. Targeting high-value tourism markets is part of the future vision for Icelandic tourism. It was pointed out that increased value would also apply to the domestic market, as well as the inbound tourism market.

Government of Iceland, n.d.a.

As part of the Icelandic Government’s counter efforts against the impact of the pandemic, Icelanders were, like the local population in many other countries, encouraged to travel domestically. Many tourism companies offered discounts, or had special offers to attract domestic tourists that stakeholders thought unlikely to continue in the future. The stakeholders pointed out that the tourism industry learned a lot about domestic tourists, and equally, so did the residents about the industry. Looking back to the pandemic 10 years from now, we might see a shift in how the domestic market views domestic tourism. The stakeholders were certain that the pandemic had raised awareness of residents in Iceland as potential customers alongside inbound tourists. Simultaneously, the pandemic strengthened our social understanding of how the industry works, and that domestic tourists will be more open to all sorts of future possibilities and offers in tourism in Iceland. This knowledge would be important for the future. It was pointed out that the domestic market would be more important for the tourism industry in the future when it comes to climate change and potential changes in how people travel. The domestic market would also be important for sustainability in the tourism industry and destination development. However, the attention that the domestic market received during the pandemic could fade out when the tourism industry re-shifts its focus to inbound tourism. Most Icelandic tourism companies are small or micro-sized, and are likely to have their hands full with servicing international tourists. It was pointed out that in regards to residents’ satisfaction with tourism, when residents can be consumers of tourism services, they are more likely to be comfortable with tourism, which can directly impact residents’ satisfaction with tourism.

The Ministry of Culture and Business Affairs’s role is to create an environment for cultural work, business, and tourism that promotes prosperity and value creation for society. The main issues that the ministry deals with are cultural issues and issues of the Icelandic language, consumer and competition issues, tourism, media, and creative industries, general business issues, and state aid. The Ministry of Culture and Business Affairs is responsible for developing tourism policy and coordinating governmental bodies’ work. The Department of Business Affairs and Tourism is the lead department, and oversees the operation and performance of the Icelandic Tourist Board.

The Icelandic Tourist Board is an independent authority under the auspice of the Ministry of Culture and Business Affairs. Its activities are regulated through the act no. 96/2018 on the Icelandic Tourist Board, and the act no. 95/2018 on Package Travel and Linked Travel Arrangements. The Icelandic Tourist Board’s responsibilities include implementing the government tourism policy, planning and support for regional development, licencing and monitoring licenced activities, data collection, processing and presentation, safety, quality, and consumer protection in tourism, and administration of the Tourist Site Protection Fund.

Six regional destination marketing offices (DMO) operate around Iceland outside the Capital area, and they are responsible for the marketing and promotion of the regions. The DMOs work for 900 tourism companies and 66 municipalities, and they are a forum for cooperation between the state, municipalities, tourism companies, and other stakeholders on tourism and the development of the region's tourism in the future.

Regional Marketing Offices of Iceland, n.d.

Every DMO operates their own website and social media in English and Icelandic with information on tourism in the regions. The DMOs work with The Icelandic Tourist Board on destination management plans to coordinate the development and management of tourist flows in each region, in addition to strengthening the local tourism framework. In 2021, on behalf of the Government, the Icelandic Tourist Board and the regional authorities committed to operating a special Destination Management and Marketing Offices (DMMO) in each region of Iceland.

Icelandic Tourist Board, n.d.

The Icelandic Tourist Board allocates, for three years, 33 million ISK to North Iceland’s and South Iceland’s DMMOs, and 22 million ISK to the other regions. In 2021, DMOs/DMMOs made three-year agreements with Business Iceland on cooperation with the international marketing of Iceland as a tourist destination.

Íslandsstofa, 2021.

The Icelandic Travel Industry Association (SAF) is an association of Icelandic travel and tourism companies. The purpose of the Association is to promote and protect the common interests of its member companies, and support its members in the improvement of their services and operations.

SAF, n.d.a.

To support a strong reconstruction, SAF published in 2021 a Roadmap on tourism resilience to 2025. SAF’s roadmap summarises 11 important priorities of the industry and proposals for government actions to expedite and support economic recovery and limit negative and long-term societal impacts of the pandemic. One of the priorities is to strengthen the domestic market where the government is taking targeted steps to strengthen the domestic tourism market and increase its share in the overall scope of the industry. SAF claims that a stronger domestic market has a stabilising effect, boosts employment, and increases local people's knowledge and satisfaction with the growth of the industry through the increased use of the quality of life that the industry builds in local communities throughout the country.

SAF, n.d.b.

The Tourism Cluster Initiative is a cluster network of travel agents, tour operators, hotels, attractions and activities, restaurants, airlines, public relations, IT solutions, maintenance service, engineer service, banks, foreign exchange, law firms, educational institutions, and retail.

Iceland Tourism, n.d.

The Tourism Cluster Initiative‘s main objective is to promote competitiveness and value creation within the Icelandic tourism industry, and to develop a co-operating forum for different stakeholders where the main focus is on linking them together and opening up for interaction between them. Their main projects are investment in tourism, responsible tourism, and regional development and networking.

Iceland Tourism, n.d.

The current future vision for Icelandic tourism till 2030 is that Icelandic tourism will be leading in sustainable development, and that the tourism industry is profitable and competitive in harmony with the country and its people.

Government of Iceland, n.d.a.

The focus is on profitability above tourist numbers, benefits for locals in all regions, unique experiences, quality and professionalism, and balance between conservation and utilisation. This future vision is the foundation of the government’s tourism policy-making plans for 2020-2025 and 2025-2030. Due to the pandemic, the policy has not been finalised and no action plan exists.

Interviews with stakeholders confirmed that the responsibility for the development of domestic tourism, management and marketing is at present not formally at anyone's hands. According to act no. 73/2005 on tourism administration, The Icelandic Tourist Board (ITB) was responsible for the marketing and promotion of tourism in accordance with the tourism minister's decision at any given time. From the years 1994 through 2014, ITB supervised different marketing that focused on the domestic market. However, in 2010, all marketing activities for foreign tourists were transferred from ITB to Business Iceland, leaving the domestic market behind. The law was not changed concurrently until 2018, with Act No.96/2018 regarding ITB, when marketing and promotion was removed, and is therefore no longer ITB´s responsibility. From the years 2015 through 2019, no funding was allocated to domestic marketing, but in 2020 and 2021, the minister of tourism allocated 40 million ISK to the ITB to encourage Icelanders to travel domestically and buy domestic goods and services. The project was called “Ísland, komdu með” (Iceland, come along), and was operated in consultation with the DMMOs. Online traffic was redirected to the website www.ferdalag.is where information on the diverse services offered across the country is accessible.

Otherwise, stakeholders identified the DMMOs as possible patrons for the domestic market, and some stakeholders pointed out that it was critical to prioritise domestic tourism development better on the agenda. The domestic market has only been a small part of the projects, and no special focus has been placed on it. It was pointed out in a stakeholder interview that tourism marketing does not always have the purpose to sell; it is also an educational tool regarding Icelandic tourism.The current agreements between ITB and the DMMOs do not mention obligations towards the domestic market, and no funding is allocated to that matter.Some DMMOs, however, want to manage the domestic market, but since they have no funding to do it, they have settled with basic promotions on their website and social media.

During the first wave of COVID-19 in March 2020, the Icelandic government put together an action plan to mitigate the economic effects of the pandemic. One of the measures taken to support the tourism industry was to provide gift certificates from the government to the residents of Iceland. The gift certificate was called Travel gift (isl. Ferðagjöf), and was an ISK 5.000 digital grant for persons aged 18 or older with an Icelandic social security number and a registered legal domicile in Iceland.

The overall goal was to boost domestic consumption by encouraging residents in Iceland to travel domestically, experience new things all around Iceland, and support the tourism industry, which had been drastically affected by the pandemic. The Travel gift was delivered in the form of a bar code via a smart device application that was displayed by the customer when paying for services, such as accommodation, transportation, dining, and activities within the tourism industry. The Travel gift was initially a temporary solution to aid businesses through the worst of the pandemic during the summer season. The first Travel gift was valid from 18 June – 31 December 2020. As the pandemic progressed, the government decided to renew the Travel gift until 30 September 2021.

The government's decision was based on legislation act no. 54/2020 on travel gifts, which was enforced on 23 June 2020. Icelandic tourism businesses and service providers were encouraged to enroll in the program to be eligible to receive Travel gifts. Consumers picked up their Travel gift at Ísland.is with their electronic ID before downloading the app called “Ferðagjöf” from the App Store or Play Store.

The Travel gift was a temporary solution to mitigate the economic impact of the pandemic in 2020 and 2021. The Travel gift was not available in 2022, and there are no plans to renew it in the coming future.

The Travel gift was a collaborative project between The Ministry of Tourism, Industry and Innovation, The Icelandic Tourist Board and Digital Iceland, which is operated by the Ministry of Finance and Economic Affairs to fulfil the government’s aims to make digital services the main means of communication between its agencies and the Icelandic people. The team first met in March 2020 to outline the task. They hired the consulting company Parallel, which specialises in digital opportunities and the management of IT-implementation, and the company YAY ehf. to develop the app.

In view of the circumstances due to the pandemic, great emphasis was placed on bringing the solution to realisation as soon as possible. The team held introductory meetings for companies to encourage participation and seminars to explain how to participate in the project. Companies were encouraged to create special offers related to the travel gift to attract customers and boost sales. Meanwhile, the legislation act was being developed and submitted to Parliament in late May 2020. The legislation act was accepted by the Parliament on 23 June 2020. The Icelandic Tourist Board supervised the implementation of the law, and hosted the project via their website focusing on domestic travels, organised by the Icelandic Tourist Board. Statistics on Travel gift amounts and its usage was updated daily by the Icelandic Tourist Board on the Icelandic Tourism Dashboard. 

The Icelandic government undertook various measures to mitigate the economic and social effects of the pandemic in Iceland. The Travel gift was one of the key fiscal policy measures in response to the pandemic.

Government of Iceland, n.d.b.

The Icelandic Government allocated ISK 1.5 billion to the travel gift in 2020 and the same amount in 2021. The budget was to cover the Travel gifts and other costs.

The Travel gift was one of the tools that tourism businesses utilised to attract domestic tourists during the pandemic. According to the Icelandic Tourist Board, a total of 1029 businesses signed up for the project, of which approximately 940 received Travel gifts. In 2020, approx. 206.000 travel gifts were used, and 218.000 in 2021 (Fig. 13). Over ISK 1 billion worth of Travel gifts were used each of the two years. Most Travel gifts were used in restaurants, for accommodations or recreation and most of them were used in the Capital area, in nationwide companies, in South Iceland and Northeast Iceland (Fig. 14). The digital solution was considered innovative, and in line with the government’s aims for digital services.

Figure 13. Amount of Travel gifts by business categories. (Source: Icelandic Tourism Dashboard, 2021)

Figure 14. Ratio of Travel gifts used by region. (Source: Icelandic Tourism Dashboard, 2021).

Overall, the Travel gift did what it was supposed to do. By creating incentive for consumption, the tourism industry received a vital injection, which was the main goal all along. It was not possible to collect data on whether the Travel gift created an incentive regarding the domestic market. Surveys among Icelandic tourists indicate that approx. 48 per cent used their Travel gift during their travels in Iceland.

Gallup, 2022.

Álfheimar Country Hotel is located in a remote fishing village of 130 inhabitants in Northeast Iceland, approximately 670km from the Capital area and 70 km from the nearest regional airport in Egilsstaðir. Owned and run by locals, the hotel has 32 rooms and a restaurant. Since 2008, Álfheimar has offered guided hiking and walking tours along a vast net of well-marked and versatile hiking routes in the area, which the locals have maintained, in deserted coves and the surrounding mountains during the summer season. They offer a complete 3- and 5-day package to international tourists, which includes airport pick-up and drop-off, hotel accommodation, local restaurant dishes, and local guides. According to Álfheimar’s sustainability policy, the company strives to have a positive influence on their surroundings, including nature, the economy, and the community. By allowing their guests to experience what it’s like to live in a small community, they hope that they can motivate them to take back some part of that vision. The company places great emphasis on the fact that the guests are visiting a small community, as they want them to get to know the life there. Cooperation with other companies in the village is important, and the company considers its social responsibility to be great. They arrange company visits for their guests to taste local products, which may turn into sales and potential future customers.

Like many other tourism businesses during the pandemic, the owners of Álfheimar anticipated less business activity in the summer of 2020 due to the sharp decline in foreign tourist arrivals. Although this guided tour programme had existed for foreign tourists almost exclusively with over a decade of success, they decided to offer it on the domestic market with Icelandic-speaking guides. One of the reasons was that in the spring of 2020, a few friends and acquaintances of the owners had inquired about tours in the area because they were unable to go on tours abroad that they had already booked for the summer due to travel restrictions and the pandemic. Álfheimar’s owners made the tour available in Icelandic on the hotel’s website and via Travel East, an authorised travel agency of which the owners are shareholders. They also made the tour available on Hey Iceland’s website, a local Icelandic travel agent. They promoted the tours for one week at a national radio station and on a national TV-station, but according to Arngrímur Viðar Ásgeirsson, one of the owners of Álfheimar, word of mouth was probably one of the most effective forms of marketing these tours. The tours were available in the summer of 2020.

The package included a 3- or 5-day hike with local Icelandic-speaking guides, hotel accommodation, and all amenities. The guided tours were only available in the summer months, from early June to mid/late August. The tours were available to the domestic market in the summers of 2021 and 2022. Álfheimar plans to continue with the tours on the domestic market for the coming seasons.

Álfheimar is a small and locally-run tourism business. The product’s composition is simple and in the hands of the company; no sub-contracts, rentals, or bookings through a third party are necessary. They provide local Icelandic and English-speaking guides, and their hotel and restaurant.

No considerable funding was needed for adjusting this product to the domestic market.

Bringing the tour to the domestic market was considered as a success. Over the course of the summer in 2020, Álfheimar provided approximately 20 tours for more than 200 domestic tourists, some of which had never been to East Iceland, with a turnover of approximately ISK 15 million. The highest demand was in July, and the lowest in the beginning of June and the end of August. The owners of Álfheimar discovered that many of their customers in the summer of 2020, both groups and individuals, had previously booked full-service outdoor and/or activity tours abroad that were cancelled due to the pandemic. Pre-planned full-package tours with all amenities had long been available for international tourists in Iceland, but they had not been easily available on the domestic market before the pandemic. Álfheimar discovered a niche domestic market in great need for such products since Icelanders could not travel abroad during the pandemic as they normally did. According to Ásgeirsson, the customers were high-end, on average over 50 years old, and willing to spend money on their tour during their holiday as if they were abroad.

Álfheimar continued offering the tours on the domestic market in 2021 and 2022, as there was still a demand for the tours. Last summer, approx. 10 tours accommodated around 100 domestic customers in early June and the end of August. Ásgeirsson claims that these tours were sold by reputation only on the domestic market, not because of advertisement or other marketing. He admitted that since foreign tourists have re-arrived, the demand during the summer months is greater than the supply.

The biggest lesson for the owners was that there is a niche domestic market that exists, and they are willing, ready, and able to buy these products for a fair price. Prior to the pandemic, the owners knew that this niche market probably existed, but the company was already operating at full capacity with international tourists. They also realised that Icelanders, as tourists, can choose to go anywhere in their world. In that sense, Álfheimar is competing against other possible destinations in the world for Icelanders as tourists, and according to Ásgeirsson, their products must be put together in such a way that it stands up to the comparison.

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SAF. (N.d.b). Vegvísir um viðspyrnu 2025 – 11. Efling innanlandsmarkaðar. (Roadmap on tourism resilience 2025 – 11. Strengthening the domestic market). https://vidspyrna.saf.is/vegvisir2025/fraedsla-og-haefni/.

Statistics Iceland. (2022a). Population – key figures 1703-2022. https://px.hagstofa.is/pxen/pxweb/en/Ibuar/Ibuar__mannfjoldi__1_yfirlit__yfirlit_mannfjolda/MAN00000.px/table/tableViewLayout1/?rxid=faa45854-b90b-46a7-84f1-032820c26cd6

Statistics Iceland. (2022b). Ferðaþjónustureikningar 2009-2021 (Tourism Satellite Accounts 2009-2021). http://hagstofan.s3.amazonaws.com/media/public/2022/496ed1e7-4c07-4b95-843b-d50a6f65cccd.pdf.

Statistics Iceland. (2022c). Neysla í ferðaþjónustu á Íslandi eftir atvinnugreinum 2009-2021 (Internal tourism consumption 2009-2021). https://px.hagstofa.is/pxis/pxweb/is/Efnahagur/Efnahagur__thjodhagsreikningar__ferdathjonustureikningar__ferdathjonustureikningar/SAM08002.px.

Statistics Iceland. (2022d). Neysla í ferðaþjónustu á Íslandi eftir atvinnugreinum 2009-2021 (Internal tourism consumption 2009-2021)

Statistics Iceland. (2022e). Gistinætur og gestakomur á öllum tegundum skráðra gististaða 1998-2022. (Overnight stays and arrivals in all types of registered accommodation 1998-2022). https://px.hagstofa.is/pxis/pxweb/is/Atvinnuvegir/Atvinnuvegir__ferdathjonusta__Gisting__3_allartegundirgististada/SAM01601.px

The Directorate of Health and The Department of Civil Protection and Emergency Management (n.d.). Announcements. https://www.covid.is/announcements?6d18e56c_page=1