Iceland growth demands airline-stakeholder partnership
Iceland growth demands airline-stakeholder partnership
01 MARCH 2016 9:41 AM

Iceland is dependent on airlift to fill its hotels, but its airline business requires cooperation, partnerships and vision from hotel and hospitality stakeholders if the country’s recent growth can be sustained.

REYKJAVIK, Iceland—Iceland is a fairly remote island, and its hotel and hospitality industry is dependent on airlines, but the country’s status as one of Europe’s trendiest destinations is allowing legacy and low-fare carriers to increase their airlift.

According to sources who opened the inaugural Iceland Tourism Investment Conference & Exhibition Monday in Reykjavik, inbound business requires the help and support of all stakeholders.

Panelists who participated in “The airlines’ role in the success of tourism development in Iceland” said that the cheaper air fares into Iceland do not always agree with the prices visitors experience once they pass through passport control.

“Iceland, for many of our customers, is their second or third-choice destination,” said Ali Gayward, United Kingdom commercial manager and head of Iceland at low-fare carrier EasyJet. “Our flight (prices) start low, perhaps artificially low, but then when they are here, our guests criticize the large expense of Iceland’s hotels and tours. What they are after is a sense of value.”

What is needed, panelists said, is the right balance between profitability and that sense of value. Iceland, they added, is not a cheap destination, but it must have sufficient value to ensure repeat visits or visits from friends and acquaintances.

In the conference’s keynote address, Gerard J. Inzerillo, CEO of Forbes Travel Guide, said Iceland must tread a careful line to add supply in a meaningful way

“Do not let Iceland be a tick off the bucket list, like Cuba is,” he said. “Slow it down a little, even if it means visas and tourist taxes. Another example is Capri (Italy). It allowed the cruise ships in, which chased away all the high-end business.”

Airlines, panelists said, have limited fleets and must move their inventory to places that promise the highest return on investment.

Destinations such as Iceland, they added, must do their part to make sure that demand is sustainable.

Year-round demand
“Despite The New York Times and Lonely Planet saying Iceland was their top pick of new destinations, we rely on data to tell us where to go,” said Christine Kennedy, general manager of network planning and global partnership development at Delta Airlines. “A destination has to make money, or we leave.”

At the moment that data is telling Kennedy and her team to extend Delta’s Iceland service into winter, with flights now starting in February.

“It all comes down to the return on the investment,” she said. “The mix (airlines) are in is that if you add service to one destination, you have to cut it from another.”

“In our advertising we never promote the destination. We leave that to our stakeholders,” Kennedy said, who added some tourism bureaus marketed much better than others.

Gayward suggested Iceland needed to ensure year-round demand, which “requires (an) intelligent market and partnerships.”

“Destinations compete fiercely for our business, and to make our decision we do need to see long-term sustainability,” she said. “That said, it takes a while for markets to mature, so we need to work with partners.”

Gayward also said that Icelandic tourism bureau support was not all it could be.

“Bottom line is that we have to always move capacity to aid return on investment for shareholders,” she said.

New markets
Another problem in this large equation for Iceland is that most feeder markets only know of its capital, Reykjavik, panelists said.

“We do not use Iceland as a flow-through market,” Kennedy said. “Our customers pretty much only know Reykjavik, so the challenge is to create awareness of other destinations.”

The other legacy carrier on the stage, Icelandair, owns several hotels in Iceland and on Monday announced a partnership with Hilton Worldwide Holdings to open three hotels, two of which will be historical properties flagged under Hilton’s Curio brand. 

Despite this new incentive to add airlift, Icelandair still has to balance its offerings, according to director of marketing and business development Guðmundur Óskarsson. The company was fundamental as the catalyst of tourism when 20 or so years ago it allowed transatlantic flyers to make stopovers in Iceland without being penalized, and that does not come without problems, Óskarsson said.

“We need to add to both spokes,” he said. “When you add a U.S. route, you need to add a European one and have them complement one another.”

Óskarsson added that he would not want to start a route unless he could be sure it would operate all year.

He said to promote second-tier cities in Iceland and to spread the increasing numbers of tourists around the country, there would need to be a lot of cooperation and promotion from stakeholders.

Those second-tier cities provide opportunity to the low-fare entrants, panelists said.

Budget airline Wow Air, which last year started service to the United States in 2015, was born and bred in Iceland, but VP of network and planning Daníel Snæbjörnsson said that despite that pedigree, the company could not guarantee it would stay in Iceland if sustainability was not increased and then maintained.

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