Iceland Didn't Accidentally Become a Tourism Superpower. Someone Built the Boom.
Wendover Productions tells a seductive story: a banking collapse made Iceland cheap, a volcano made it famous, football made it fashionable, and tourists transformed its economy. But the story leaves out something important: Iceland did not simply get lucky. Its government and tourism industry deliberately engineered a recovery, invested in international marketing, and mobilised the population to sell the country. The distinction matters because it changes who deserves credit for the boom—and what other countries can actually learn from it.
The 2010 Eyjafjallajökull eruption was initially a tourism disaster, not a free advertising campaign. Visitor bookings fell, negative publicity spread, and the government and tourism industry responded with the coordinated Inspired by Iceland campaign.
Promote Iceland: Inspired by Iceland+2
The cheap krona was a head start, not the engine
The 2008 currency collapse genuinely helped. But the affordability explanation becomes much weaker when we examine what happened next: Iceland's tourism continued growing even as the krona appreciated and the country became more expensive. The IMF's 2017 investigation found that this appreciation had not deterred the surge in visitors, while Iceland's price competitiveness was deteriorating.
International Monetary Fund
The numbers are revealing. Between 2012 and 2016, American arrivals increased by 340%, while the real exchange rate of the krona against the dollar appreciated by approximately 8%. Iceland was attracting dramatically more Americans without becoming proportionately cheaper.
Landsbankinn.is
The lasting competitive advantage was connectivity, not cheapness. Between 2009 and 2017, the number of airlines operating from Keflavik increased from seven to 26, and direct connections grew to more than 80. An expansion of the airport's baggage system in 2016 also removed an important capacity bottleneck.
International Monetary Fund
Iceland's own October 2015 Road Map for Tourism identified the combination of international media coverage, increased flight supply, exchange-rate developments and effective marketing as the forces behind its extraordinary growth. The government and Icelandic Travel Industry Association had consulted more than 1,000 people and established a Tourism Task Force to coordinate the next five years of development.
Government of Iceland
There is an important qualification: the same government document admitted that Iceland lacked reliable, internationally comparable tourism data, had unclear institutional responsibilities and operated under a complex legal framework. The country was deliberately building a tourism industry while struggling to establish the institutions needed to manage it.
Wendover describes the ingredients but does not properly establish their relative importance. A temporary currency discount helped open the door. Marketing, safety, natural attractions and expanding air connections kept visitors coming.
WOW Air exposed the real vulnerability
The video was published on June 5, 2019. At that point, its uncertainty about declining visitor numbers was understandable. But subsequent investigations established a much clearer explanation.
WOW Air accounted for 31% of flights into Iceland in 2018 and approximately half the increase in passenger numbers since its first flight in 2012. It collapsed in March 2019. Primera Air had already collapsed in 2018, while the grounding of Boeing 737 MAX aircraft restricted Icelandair's ability to replace lost capacity. The IMF identified high operating costs and intense international competition as underlying problems.
Stjórnarráðið
The IMF projected Iceland's economic growth would fall from more than 4.75% in 2018 to just 0.3% in 2019. This was not simply a case of tourists getting bored with Iceland. The country's international transport capacity had suffered several simultaneous shocks.
There is another important distinction the video misses. By October 2019, total passenger traffic through Iceland had fallen 30%, but transit passengers had fallen 53%, actual arrivals had fallen 14%, and foreign hotel nights had fallen only 1%. The IMF explained that WOW's connecting passengers tended to stay for shorter periods and spend less than other visitors.
Stjórnarráðið
Airport traffic was not the same thing as tourism revenue. A connecting passenger passing through Keflavik was not necessarily a paying visitor to Iceland. Treating the loss of those passengers as equivalent to losing the same proportion of actual tourists exaggerates the damage to the visitor economy.
The OECD subsequently identified reduced air access as the principal reason for the 2019 visitor decline, with the stronger krona also contributing.
OECD
The distinction matters. Iceland's tourism model was not simply vulnerable to changing travel fashions. It was vulnerable to the financial survival of airlines, aircraft availability and the capacity of a relatively small airport to maintain international connections.
Tourism became a major export dependency, but it was not another banking system
The video describes Iceland's economic reinvention without properly quantifying the resulting dependence.
By 2018, tourism generated ISK 520 billion, equivalent to 39% of Iceland's total export revenue. Travel exports represented 47.7% of service exports, and the industry employed approximately 30,000 people, or 15.7% of the workforce, according to the OECD.
OECD
However, export receipts and GDP measure different things. Statistics Iceland's revised tourism satellite accounts put tourism's direct contribution at 8.1% of GDP in 2017 and 8.0% in 2019.
Statistics Iceland
This distinction matters when comparing tourism with the banking collapse. The three major banks had accumulated assets exceeding nine times Iceland's GDP. That was an enormous balance-sheet exposure, not simply an industry earning a large share of export revenue.
ICELAND CHAMBER OF COMMERCE
Tourism did become Iceland's leading export earner, but it did not recreate the banking sector's extraordinary asset-to-GDP imbalance. Its vulnerability was concentrated in foreign visitor spending, aviation access and the country's dependence on international travel.
The longer-term figures confirm that tourism was not merely a passing fashion. In 2024, it directly contributed 8.7% of GDP and 15.8% of employment, while travel accounted for 45.6% of service exports. Iceland received approximately 2.3 million international visitors in 2025.
OECD+1
But the pandemic provided a much harsher test of that dependence. In 2020, passenger arrivals, hotel stays and foreign credit-card spending fell by almost 80%. Tourism turnover fell 60%, exports of goods and services declined 31%, and Iceland's real GDP contracted 6.6%. Unemployment rose to 6.4%.
International Monetary Fund
The tourism industry eventually recovered. The point is that a country can have an excellent tourism product and still be exposed to events beyond its control. Iceland had built a major export industry whose customers, airlines and international transport connections were all outside its control.
The costs of the boom were more than scenery
Wendover correctly identifies housing pressure, environmental deterioration and infrastructure problems. But it mostly leaves these as general consequences rather than examining their economic scale.
A February 2018 Central Bank of Iceland working paper examined Airbnb's effect on the Reykjavik housing market. Its authors estimated that the expansion of short-term rentals contributed approximately 2% per year to real house-price increases over the preceding three years, accounting for around 15% of the total increase during that period. This was not the entire housing problem, but it was a measurable contribution.
Rafhladan
The labour market also became increasingly dependent on immigration. By the end of 2022, foreign workers represented approximately 40% of Iceland's tourism workforce and 20% of the country's overall labour force. The IMF found that immigration helped satisfy demand in tourism and construction and contained wage pressures, while also contributing to rental-housing and public-service pressures.
International Monetary Fund
The video mentions foreign workers, but the broader relationship matters: tourism growth requires workers, workers need housing, and expanding populations place additional demands on public services. These costs do not disappear simply because visitor spending increases GDP.
Infrastructure remains another unresolved problem. The IMF's 2023 assessment found that Keflavik's capacity had not kept pace with traffic growth and that limited regional airport connections concentrated tourism around southern and western Iceland.
International Monetary Fund
Even in 2026, Iceland is still developing ways to make visitors contribute towards the infrastructure and environmental costs of tourism. The OECD reports plans for a resource and infrastructure fee at publicly owned nature sites, intended to support maintenance, conservation and destination management.
OECD
That is a rather important part of the economic story. A country cannot indefinitely treat its natural attractions as free inputs while expecting somebody else to maintain them.
The most important omission: Iceland deliberately sold itself
The government did not simply wait for the world to discover Iceland. It financed a coordinated international marketing operation.
A peer-reviewed study by Deanne Bird and Guðrún Gísladóttir documents that the Icelandic government and tourism industry invested 700 million ISK (approximately €4.3 million) in the Inspired by Iceland campaign following the 2010 eruption.
Vegagerðin
The campaign used Iceland's own population as its marketing network. Within one day, approximately one-third of the population had participated, and more than half had contributed content within six weeks.
marketingsociety.com
The campaign's agency, Brooklyn Brothers, subsequently claimed that:
- 79,252 additional visits were generated above forecast.
- Those visits produced £138.7 million in tourism revenue.
- £2.24 million in media and production spending generated a claimed 61:1 return on marketing investment.
These are the agency's own campaign evaluation figures, not an independent controlled assessment. The case study also lists Facebook, LinkedIn and Twitter as sponsors. Its numbers should therefore be treated as promotional effectiveness claims, not unquestionable proof of causation.
marketingsociety.com
The coverage was free. Turning that coverage into a successful tourism campaign required money, coordination and deliberate strategy. That is a considerably more useful economic lesson than simply attributing Iceland's success to a lucky volcanic eruption.
One final incentive check: Wendover disclosed Brilliant as its sponsor. I found no evidence of a relevant commercial relationship between Brilliant and Iceland's tourism industry, or evidence that the sponsorship influenced the argument.
Closing verdict
Wendover gets the broad transformation right but gives readers an incomplete explanation of how it happened.
Iceland's tourism boom was not simply the result of a weak currency, spectacular scenery and three fortunate international events. It was built through coordinated government and industry marketing, expanding airline connections, airport investment and an increasingly sophisticated international tourism strategy.
Its greatest vulnerability was not simply that tourists might lose interest. It was that a small country had built a substantial export industry around international airline capacity, foreign demand and a limited number of transport connections.
The economic consequences extended beyond airport passenger numbers. They reached housing prices, labour markets, public infrastructure and the natural environment.
Iceland did successfully reinvent its economy. But the important question is not whether tourism saved Iceland. It is whether the country can retain the wealth generated by tourism without allowing the industry to consume the very assets that make Iceland valuable.
Wendover tells the story of how Iceland became fashionable. The more important story is how Iceland built an economic model around that popularity, how fragile its foundations proved to be, and who ultimately bears the cost of maintaining it.
References
1. Iceland's Tourism Revolution — Wendover Productions, June 5, 2019. The original video and the claims examined in this critique.
2. Iceland's Tourism Eruption — International Monetary Fund, June 2017. Examines the relative importance of currency movements, marketing, safety, natural attractions and expanding airline connectivity.
3. Road Map for Tourism in Iceland — Ministry of Industries and Innovation and Icelandic Travel Industry Association, October 2015. Documents the government's deliberate tourism strategy and the institutional weaknesses it was designed to address.
4. Residents' attitudes and behaviour before and after the 2010 Eyjafjallajökull eruptions — Deanne K. Bird and Guðrún Gísladóttir, Bulletin of Volcanology, April 29, 2012. Provides independent academic evidence of the eruption's local consequences and the 700-million-ISK tourism marketing investment.
5. Iceland Tourism: How Social Media Rescued Icelandic Tourism After the Volcano Explosion — IPA Social Works, Brooklyn Brothers, undated. Supplies the campaign's reported visitor, spending and marketing-return figures; its promotional provenance limits the independence of those claims.
6. Growth Seeking Balance: Economic Analysis of Tourism in Iceland — Landsbankinn Economic Research, September 29, 2017. Documents the unusual relationship between krona appreciation and rising tourist arrivals, including the extraordinary growth in American visitors.
7. Short-term Renting of Residential Apartments: Effects of Airbnb in the Icelandic Housing Market — Central Bank of Iceland, Working Paper No. 76, February 22, 2018. Quantifies Airbnb's estimated contribution to real house-price increases in the capital region.
8. 2019 Article IV Consultation: Press Release and Staff Report — International Monetary Fund, December 19, 2019. Establishes the airline-capacity shock, WOW Air's importance and the distinction between transit passengers and actual visitors.
9. OECD Tourism Trends and Policies 2020: Iceland — OECD, March 4, 2020. Provides tourism's contribution to exports, GDP and employment, together with the government's institutional response.
10. 2023 Article IV Consultation: Iceland — International Monetary Fund, May 30, 2023. Documents the pandemic stress test, migrant labour dependence, housing pressures and continuing infrastructure limitations.
11. OECD Tourism Trends and Policies 2026: Iceland — OECD, 2026. Supplies the latest economic contribution, employment and visitor figures, as well as Iceland's proposed infrastructure and conservation fee.