Why Iceland is (Still) So Hot Right Now

About a year ago, during a trip to Reykjavik, the capital of Iceland, I had the strange and rare experience of emailing a head of state, being invited over for coffee, and knocking on her front door. That’s just Iceland, people told me. You can look up anyone in the phone book, even the president. These days, Vigdís Finnbogadóttir is a former head of state in semi-retirement after sitting in office from 1980 to 1996.  As we talked, I asked her one of the most softball questions in politics:

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“What would you say was your biggest accomplishment as president?” I said.

Without even hesitating, she said, “Putting Iceland on the map.”

Most countries, of course, are already on the map. But for Iceland, it was a big deal with long-term impact. Over the past 300 years, Iceland has stood strategically in the middle of the old and new world, but awkwardly placed—too far north and too cold to be a major destination. Finnbogadóttir changed that.  She started attending more international conferences. She befriended leaders like Ronald Reagan and Mikhail Gorbachev—and made sure to be photographed with them. In her house, she showed off a snapshot of her posing with Pope John Paul. Two decades before the term was claimed by Silicon Valley women seeking more respect and money, Finnbogadóttir leaned in.

Tourism followed. Growth is easy when you start from virtually zero. But Iceland has never stopped. Since Finnbogadóttir left office in the 1990s, Iceland’s tourism has nearly quadrupled. Find another country that can boast the same and you’ll land only in the Middle East, where more populous countries like Qatar and the United Arab Emirates have rapidly industrialized and turned themselves into massive layover hubs with sky-high tourism budgets and only-found-here amenities.

Iceland’s story seems more remarkable because, despite such immense decade-over-decade growth, the country is still just a small town. Imagine putting a population on par with Riverside, California (315,000) on a piece of land the size of Virginia. Nearly half of them live in the capital, leaving little else but the beauty of sweeping mountains, craggy fissures, steaming pools of geothermal heat. On a good day, a drive from one coast to the other will take eight hours. It takes longer with weather impediments, which there almost always are.

So why do so many people keep flocking to Iceland? Just as Iceland has one of the world’s most strategic geopolitical pieces of land (just ask China), it also has an optimal resume for this moment in time. A 2013 tourism report showed that as global incomes have risen, people with newly disposable incomes have been attracted to places that are far, but not too far, exotic, but not Antarctica, and yet still economically and politically stable. Add a unique but not punishing climate, and ecotourism features like the stunning aurora borealis and the opportunity to literally walk between two continents—North America and Europe—and you get a recipe for tourism that speaks to millions, if not billions, of people.

With that reality, one wonders how much bigger Iceland’s economy and tourism can get. Bearish investors see unsustainable growth in Iceland, especially after the country’s shaky recovery following the world’s 2009 recession. But others see bullish potential. Before the recession, Iceland had the sixth highest GDP per capita in the world, a ranking it’s eager to get back (it’s currently seventeenth).  Its banking system continues to expand and has a booming export business. Increases of global travel have brought planeload after planeload of visitors, many lured by free stopovers in Reykjavik. Perhaps most impressive, it’s managed to sustain its growth with crystal-clear air, some of the world’s purest water, and the near limitless amount of geothermal energy that could sustain dramatically more growth and visitors.

Despite Iceland’s more than thousand-year history, one particularly striking thing about the country is that it still feels new. Unlike the culture capitals of Western Europe, or the populated megalopolises of Hong Kong or São Paulo, Iceland isn’t crowded. Thousands of people don’t wait in line to see art, like they do in Rome, or circle around blocks for cupcakes, like they do in New York. In other words, at the top of Iceland’s resume is its charm. Growing just slowly enough might be its unintentional yet effective strategy to keep it.