Iceland’s booming tourism industry, buoyed primarily by an increase in US visitors, has presented the country with new economic demands and challenges, says GAMMA Capital Management, an advisory firm based in Reykjavik.

The tourism sector has created more jobs than any other sector of the Icelandic economy since 2010, including 12,000 new jobs from 2010 to 2016, as reported by GAMMA.

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While this rapid expansion has greatly benefited Iceland’s economy, GAMMA contends that structural inadequacies must be addressed for the sector to thrive in the future. 

“Our research shows a heightened demand for, but low supply of, Iceland’s tourism infrastructure,” said Valdimar Ármann, CEO of GAMMA. “The team identified airports, roads, hotels and tourist site infrastructure as areas that are underfunded.”

Already, Iceland has taken steps to address this tourism surge. The country’s sole international airport in Keflavik offers flights to more than 90 destinations and serves as a crucial transit hub for passengers travelling from North America to Europe. As a result of the airport’s new-found prominence, road and rail projects – including a proposed $650m to $950m Keflavik-Reykjavik express train – represent potential opportunities for international investors, according to GAMMA.

Besides infrastructure, hotels are another underfunded key sector of Iceland’s tourism economy. In the words of the GAMMA report, “Iceland’s hotel industry has four large chains with a combined market share of 54%, but there is a notable gap in the luxury segment, which presents opportunities for developers.” With regard to the future, “plans [have called] for building 2,500 rooms before 2020 to serve 190,000-215,000 visitors,” according to GAMMA.

Investor monitoring service, fDi Markets, has recorded three greenfield projects in Iceland’s hotels and tourism sector since 2003. Not surprisingly, all three investments occurred last year, when Iceland witnessed double-digit year-on-year tourism growth every month, as reported by GAMMA.

Despite the recent flow of US tourists, not a single US company has sponsored a greenfield investment in Iceland’s tourism sector. Instead, companies based in Spain, Denmark, and Australia are filling the void, according to fDi Markets. Most recently, Spanish hotel company Hotusa invested $62.30m in October 2017 for the creation of a new hotel site in Iceland.

However, the US remains the top source market for overall greenfield FDI projects in Iceland. fDi Markets reports, hat US companies have sponsored 10 greenfield projects in Iceland since 2003.