ImageA hotel in Reykjavik, Iceland, is one of many in the country whose occupancy rate has plummeted during the pandemic.
Credit…Bara Kristinsdottir for The New York Times

Tourism is undergoing a downturn all over the world, but several factors make Iceland particularly vulnerable to the industry’s crash: geographic isolation, a small domestic population, strict border measures and an economy that — after an extraordinary, decade-long tourism boom — had come to depend heavily on foreign tourists. A recent surge in coronavirus cases has added to Iceland’s challenges.

But while visitor numbers are low, Iceland is positioning itself for a major tourism rebound after the pandemic. The government is investing more than $12 million in tourism infrastructure, while improving roads and harbors across the country.

To keep the tourism industry afloat in the short term, the government is also investing more than $9 million in a program that distributes free travel vouchers to Icelandic citizens and residents. A marketing campaign targeting domestic tourists was rolled out in the late spring; an international version will be unveiled as soon as travel restrictions are lifted.

The voucher campaign helped to jump-start demand for hotels, restaurants and attractions. So far, Icelanders have used more than $1.2 million worth of their free travel vouchers, which are valid through the end of the year.

The summer was “pretty good, considering everything,” said Bjarnheidur Hallsdottir, the chairwoman of the board of the Icelandic Travel Industry Association and the chief executive of two tourism companies. “And then suddenly out of nowhere, the government decided to change the rules at the borders. Since then, everyone is crying.”

Under the new rules, which took effect in August, arriving passengers may choose either to submit to two screening tests for the virus, separated by five days’ self-quarantine, or to skip border screening and self-quarantine for 14 days after arrival.

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