Iceland's Cruise Tourism Faces Significant Decline Following New Infrastructure Tax

New Infrastructure Tax Implemented

Iceland's cruise tourism sector is currently facing a significant downturn, attributed to the introduction of a new infrastructure tax that came into effect on January 1, 2025. This new levy requires cruise passengers to pay 2,500 Icelandic Krona (ISK), approximately $18 USD or £14, for each 24-hour period their ship spends in Icelandic waters, regardless of whether passengers disembark.

The Icelandic government's rationale behind the tax is to generate revenue for new infrastructure, fund environmental programs, and ensure that the benefits of growing tourism are distributed across the country. Officials projected that the tax would generate over $10 million USD annually. This new fee represents a substantial increase, being reportedly five times higher than the previous accommodation tax rate of ISK 1,000 (approximately $7.26) in 2024.

Sharp Decline in Bookings and Economic Impact

The immediate consequences of the infrastructure tax have been a dramatic reduction in cruise bookings and port calls. Data from Cruise Iceland, the country's cruise sector representative, indicates a sharp drop in advance bookings. Some rural ports have seen a decline of over 50% for the years leading up to 2027. Overall, Cruise Iceland projects a 14% drop in nationwide cruise bookings for 2026 and a more significant 30% decline for 2027.

Specific examples highlight the severity of the impact:

• Akureyri anticipates 44 fewer ship visits.
• Grundarfjörður and Vestmannaeyjar have recorded 7 and 10 cancellations, respectively.
• Borgarfjörður Eystri is expected to receive just one ship in 2027, a stark reduction from 28 in 2024.

This decline is particularly damaging for rural coastal communities that heavily rely on cruise tourism for their economic viability. Local businesses are struggling, and municipalities are predicting losses amounting to billions of ISK. The tax is also described as significantly higher than comparable charges in neighboring countries, making Iceland a less attractive destination for cruise operators.

Industry Concerns and Future Outlook

The cruise industry has voiced strong concerns regarding the new tax. Cruise lines are actively reassessing itineraries and, in some cases, opting to avoid Icelandic ports altogether. Francesco de Curtis, MSC Cruises' Port Operations Director, stated that the fee 'could affect our assessment of the viability of Iceland in our future itineraries and plans.' Sigurður Jökull Ólafsson, managing director of Cruise Iceland, described the situation as 'seriously bleak,' particularly for communities outside the capital, Reykjavík.

While Cruise Iceland acknowledges the principle of an infrastructure fee, it emphasizes the necessity of a phased and structured implementation with adequate notice, especially given that cruise itineraries are planned years in advance. The organization has presented its findings to the Parliamentary Committee on Economic Affairs and Trade, urging a reassessment of the policy. The current trajectory suggests that the financial gains from the tax may be offset by substantial losses in tourism revenue and economic activity in affected regions.