Reykjavík Grapevine - 04.04.2014, Blaðsíða 17

Targetting a set of “tourist seg-
ments,” types of travellers “for whom
Iceland has a strong intrinsic ap-
peal” (Aff luent Adventurers, Older
Relaxers, Emerging Market Explor-
ers, City Breakers, and MICE—or
Meetings, Incentives, Conferences,
and Events—visitors), the report pro-
jected that, for the first time ever,
tourism would overtake fishing as
Iceland’s largest export sector in
2013. It would therefore present a se-
ries of “significant challenges” (and,
it goes without saying, opportunities
for economic exploitation). So BCG
presented a “future vision for Icelan-
dic tourism.” A pivotal component of
this vision? An “Environment Card”
which they claim “delivers the opti-
mum balance between feasibility,
fairness, efficiency, and capacity to
raise significant funds.”
Now, it isn’t impossible that a pri-
vately-funded foreign report would
be able to furnish some useful ideas
regarding Iceland’s “untapped oppor-
tunities,” but it’s difficult to deny that
with prominent backers in the airline
industry, the report’s findings are far
more likely to be biased toward say,
a “multi-site access charge” (the Na-
ture Pass model) over a surcharge
added to airline tickets. And while
there were a handful of other reports
which outlined the pros and cons of
various fee collection options, this is
the only one that has been endorsed
by key members of the Icelandic gov-
ernment.
Yep: both Prime Minister Sig-
mundur Davíð Gunnlaugsson and
Minister of Industry and Commerce
Ragnheiður Elín Árnadóttir con-
tributed glowing forewords to the
BCG report. For his part, Sigmun-
dur Davíð stated that he “welcome[d]
this important contribution…[which]
provides a clear view on some of the
key questions we need to answer as a
nation.” Ragnheiður Elín noted that
“some landowners and firms are al-
ready charging for access to certain
areas, but we have yet to formulate a
comprehensive strategy for Iceland as
a destination.” And so, she says, she
is “delighted that Icelandic tourism
operators should join forces” on such
an “ambitious” report.
So, let’s take a look at a few high-
lights from this clear-eyed, ambitious
“future vision,” shall we?
Product Iceland
In the “Product Development” sec-
tion (the product being Iceland)
the report states that there are two
“key areas” in which Iceland “could
improve its use of existing assets.”
These areas are better management
of “visitor f low” and congestion and
the development of “existing attrac-
tions.” At the moment, it seems, Ice-
land (that is, Icelandic nature) is not
doing enough to hold its viewers’ at-
tention:
“A typical visit to Gullfoss might
consist of a walk down the path from
the car park to the lower viewing ar-
eas (20 minutes with photos); a walk
to the higher viewing areas (20 min-
utes with photos); and a potential
visit to the shop and cafe (0 – 30 min-
utes)…the average tourist may wish
that there was more opportunity to
engage in activity while admiring the
extraordinary falls.”
It then falls on individual site
managers and owners to concoct
time-killers and added “attractions”
near to these “extraordinary” but
not sufficiently captivating natural
wonders. As an example, the report
points out the success of tourism
managers around the Dead Sea.
“The Dead Sea has a fairly limited
natural offer,” it reads. “The recom-
mended maximum f loating time is
just 10 minutes. Even adding time
to purchase and cover yourself in the
famous Dead Sea mud, the whole ex-
perience lasts barely an afternoon.”
But this is where Jordanian tourism
operators have excelled. Not only are
there hotel resorts in the area which
offer “private access to the sea,” but
there are also “a full range of comple-
mentary activities, including sports,
spas, food options, and evening en-
tertainment.”
That’s what Þingvallavatn has
been missing. Exclusive beach access
and evening entertainment.
“Special, temporary
exhibits”
Building on the idea of site develop-
ment, BCG pushes hard for site man-
agers to develop “value-added ser-
vices” to help boost their revenues.
“While the card would provide free
entry,” reads the report, “sites would
be able to develop new and engaging
products for which visitors would be
willing to pay extra. Many museums
operate this way,” they explain, with
the entry fee gaining visitors access
to “all standard exhibits” and then
“special temporary exhibits added on,
often with high price tags.”
Iceland’s gift to the world
These are, of course, only snippets
of a 70-page report. But while BCG
claims that environmental conserva-
tion needs to be a primary concern of
any future tourism development and
that “there are risks of growing too
far, too fast,” the overall tone of its
report is one of unabashed, optimis-
tic entrepreneurship. As represented
here, Iceland is poised (again) on the
brink of incredible economic success,
thanks entirely to its fantastic luck
at having so many exploitable natu-
ral resources. “The story of Iceland’s
tourism sector is much like that of its
geothermal energy,” reads the conclu-
sion. “Dormant for many years, with
considerable untapped potential, it is
now all fired up and ready to go.”
Ending on a poetic note, the re-
port quotes Gustave Flaubert (“Travel
makes one modest. You see what a
tiny place you occupy in the world”)
and suggests that Iceland is uniquely
situated to “turn a brash tourist into a
humble supplicant to the wonders of
nature.”
“Tourism,” we’re told, “is one of
Iceland’s gifts to the world.”
The Reykjavík GrapevineIssue 4 — 201417
or stays, but still require some form of
entrance authorisation.
Multi-Level Value Added
Taxes (VATs) On Tourism-
Related Services
Most countries in the EU apply mul-
tiple levels of VAT to various services
and products within and related to
the tourism industry. The EU aver-
ages cited in the Alta report are 10.8%
VAT on accommodation and 21.2% on
other services.
Some scholars analysing the tour-
ism industry believe that adjustment
to Iceland’s current VAT levels would
generate the necessary funds to build
up tourism infrastructures and effec-
tively address nature conservation is-
sues. In Iceland, the current VAT on
hotels is 7%, which is not only lower
than the EU average, but also sig-
nificantly lower than in other Nordic
nations (hotel VAT in Denmark and
Sweden is 25%). Iceland’s hotel VAT
was reduced to 7% in 2007 in order to
help boost the industry, as it was quite
expensive to travel to Iceland as a tour-
ist in the years of the pre-crash króna.
The previous government had intend-
ed to raise the hotel VAT to 25.5% but
met with significant pushback on this
issue, and so decided instead to sim-
ply return to what it was prior to 2007:
14%. This VAT stabilisation would
have gone into effect in 2013. When
the current coalition government lead
by Sigmundur Davíð came into power
in 2013, however, the stabilisation was
entirely scrapped, and Iceland’s hotel
VAT will remain at 7% indefinitely.
including, among others, Promote
Iceland, the Environment Agency of
Iceland, the Association of Icelandic
Municipalities, and Samút, an organ-
isation for outdoor enthusiasts.
Valgerður Rún Benediktsdóttir,
the director general of the Ministry
for Industries and Innovation, was
present at each meeting, taking notes
and compiling ideas. These ideas were
transformed by the ministry into the
draft proposed above, which will be
vetted in a cabinet-level meeting and
then sent to parliamentary commit-
tees for further changes or approval.
Once that step occurs, the law will be
presented to Alþingi and published
for public review.
Nothing Is Not An Option
According to Ingvar Pétur Guðbjörns-
son, a political advisor in the Minis-
try of Industries and Innovation, the
need for more regulated access to
Icelandic nature is obvious, as is the
need for new funds to protect that na-
ture. “We went from around 300,000
tourists in 2003 to almost 900,000 last
year,” Ingvar says. “So if we do noth-
ing, there might not be very much na-
ture to sell here in the coming years.”
Beyond preserving frequently vis-
ited attractions such as those on the
Golden Circle, Nature Pass funds
would encourage improvements to
sites outside of Southwest Iceland.
“There are countless smaller spots
that need facilities or upgrades,” Þor-
steinn says, providing the example
of Jökulsárgljúfur in the Vatnajökull
National Park. “There’s a parking lot,
a bench and a picnic table there, but
there are no toilet facilities. You can
walk around for days and not see a
single toilet.”
Proponents of the Nature Pass be-
lieve that it will also help balance the
geographical distribution of tourists.
“This actually provides an incentive
for landowners to take spots that have
been closed, because they’re inacces-
sible or unsafe, and build them up,”
Þorsteinn says. These improvements,
combined with the package-deal mod-
el of the Nature Pass, make tourists
more likely to visit the new sites, re-
ducing congestion at the most popu-
lar destinations.
The Nature Pass also avoids the
problem of long queues caused by
single-site access fees, since most
visitors will buy their passes in ad-
vance and will theoretically only need
one pass to visit most sites. “If you
come to Iceland, you don’t want to
see fences and guards selling tickets
everywhere,” Ingvar says. “That’s not
something many of us want.”
Some critics of the Nature Pass
model have argued that the govern-
ment should instead simply raise the
tax rate on the tourist industry, par-
ticularly hotels and airlines. Ingvar
counters that this would result in an
unfair cost distribution. “People com-
ing to Reykjavík for a meeting and not
going to Gullfoss and Geysir would
have to pay higher taxes,” he says.
“With the Nature Pass, those who vis-
it the sites pay for protecting them.”
This problem is compounded when it
comes to taxes on plane tickets. The
average Icelander f lies to, from and
within Iceland more often than the
average tourist, even if she visits few-
er nature sites. Based on calculations
made by an economist in the minis-
try, Ingvar says that generating reve-
nues for a nature fund through a sur-
charge on airfare would increase the
share Icelanders pay from 13- 40%.
One big question mark hanging
over the Nature Pass plan is whether
many private landowners of popular
nature sights will opt into the system.
After all, if participation is entirely
voluntary, and these owners think
they can earn more by charging on
their own, why would they sign up?
The BCG report optimistically
cites the supposedly unique advan-
tages of the Nature Pass for private
landowners, including centralised
administration, free marketing and
increased access to visitor data. How-
ever, all of these goods and services
could be purchased with enough pri-
vately raised revenue. Yet Ingvar be-
lieves that if landowners raise their
prices too high in the pursuit of prof-
it, they will start seeing fewer visitors.
“They will also have to pay salaries
and build fences and all sort of things
that they won’t have to do if they’re a
part of the Nature Pass system,” he
adds. It's one more factor that Nature
Pass proponents think will give them
a competitive advantage over—and
possibly even help them supplant—
landowners who continue to privately
manage their sites.
New Ideas For
New Problems
Þorsteinn sees ref lexive stubborn-
ness in the opposition to the Nature
Pass model. “People are afraid of new
things,” he says. “If you come up with
a new idea, a group of people who
don’t like change will just say ‘no.’ But
the Nature Pass model, if we finish it
and it works, will benefit everybody.”
If the Ministry of Industries and
Innovation can convince the critics
and sceptics in the Alþingi commit-
tees of the wisdom of the Nature Pass,
then Ingvar is confident the neces-
sary planning can be completed in
time for the proposed launch date in
January 2015. “If we can put the bill
through parliament before the end
of this session, we will have seven or
eight months. In that time I’m sure
we can put up a website and do every-
thing we need to do. That’s the idea, at
least.”
In September 2013, the Boston Consulting Group (BCG) published a report
called “Northern Sights: The future of tourism in Iceland.” The report was com-
missioned by a consortium of private companies in the tourism industry claim-
ing a “strong stake in Iceland’s future success as an attractive, growing, and
sustainable tourist destination,” notably Icelandair Group, Isavia (the company
which operates Iceland’s airports, including Keflavík and the Reykjavík Domes-
tic), Blue Lagoon and Europcar.
Axel Sigurðarson
Building “Destination Iceland”
Highlights from the Boston
Consulting Group Report
— Larissa Kyzer