Iceland Experiences Record Tourism Growth in 2025, Proposes Higher Tourist Tax to Address Environmental Impact: What You Need to Know

Published on October 16, 2025

Iceland is on track for another record-breaking year of international tourism, with 1.7 million visitors recorded in the first seven months of 2025, despite concerns over rising costs. Known for its stunning natural beauty, including geothermal hot springs, glaciers, waterfalls, and the Northern Lights, the country continues to captivate travelers worldwide. While some reports indicate a slight decline in visitor numbers due to high living costs, Iceland’s tourism sector is booming, with a marked increase in the number of tourists visiting year-round.

As Iceland experiences growing interest from international travelers, the government is taking proactive steps to address the environmental pressures of mass tourism. Among these efforts is the proposed increase in the tourist tax, which aims to support sustainable tourism practices and better manage the sector’s impact on Iceland’s delicate ecosystems. With its unique natural resources and pristine landscapes, Iceland is focusing on developing sustainable travel solutions while maintaining its appeal to tourists.

Key Developments in Iceland’s Tourism Landscape:

• Record-Breaking Visitor Numbers: Iceland welcomed 1.792 million international tourists from January to August 2025, surpassing 2024’s figures and showing a clear upward trend.
• Tourism Growth Despite Challenges: Despite setbacks such as the closure of low-cost airline Play and the volcanic eruption at Sundhnúksgígar fissure, Iceland’s tourism industry remains resilient and on track for continued growth.
• Proposed Increase in Tourist Tax: In response to the growing tourism numbers, Iceland is considering a significant hike in its tourist tax to help fund sustainability initiatives and reduce the environmental impact of tourism.

Iceland’s Tourism Growth: A Mixed Outlook

Iceland, a country often referred to as the “land of fire and ice,” has become a popular destination for travelers seeking adventure, natural wonders, and a taste of the extraordinary. Known for its geothermal hot springs, including the world-famous Blue Lagoon, as well as its glaciers and waterfalls, Iceland attracts tourists from across the globe, eager to experience its unique landscapes and natural beauty.

However, reports earlier in the year suggested a 6% decline in foreign visitors, attributed to Iceland’s high living costs and the impact of inflation. Despite these claims, Iceland’s tourism sector has shown signs of resilience. Statistics Iceland reveals that the number of international tourists has actually increased by 2.2% from 2023 to 2024, and an additional 3.5% increase in the past 12 months up to September 2025. These figures suggest that Iceland’s tourism industry is far from declining and is, in fact, benefiting from long-term growth trends.

Factors Driving Iceland’s Tourism Success

• Unique Natural Beauty: Iceland’s untouched nature and rural settings set it apart from other destinations. Tourists are drawn to its remote landscapes, which offer a chance to experience something “unique and different” from typical tourist spots. Iceland’s unspoiled natural wonders, such as the Northern Lights, glacial lagoons, and rugged coastal fjords, make it a once-in-a-lifetime destination for travelers.
• Social Media Influence: Iceland has become a fashionable destination for high-income travelers, with social media influencers playing a significant role in promoting its stunning landscapes. As people increasingly share their travel experiences on social media platforms, Iceland’s popularity continues to rise, encouraging more travelers to visit.
• High-End Tourism Appeal: Iceland has positioned itself as a destination for luxury travelers who seek adventure while indulging in high-end experiences. The growing trend of bucket-list travel has also contributed to the rise in the country’s tourism.

Preparing for Continued Growth

In response to the growing number of visitors, Iceland is investing in infrastructure to support the tourism boom while ensuring that the experience remains enjoyable for travelers. One of the key projects to address the surge in tourism is the expansion of Keflavík International Airport (KEF). The airport expansion includes the addition of better facilities for bikes, buses, and taxis, as well as a new 4-star hotel and covered walking paths for greater traveler convenience.

The airport’s master plan also includes the construction of a new East Wing terminal to accommodate the increasing number of passengers, ensuring smooth operations as the number of international flights continues to grow.

The Proposed Increase in Tourist Tax in Iceland

As part of its ongoing efforts to manage the growing environmental pressures associated with tourism, the Icelandic government has recently reinstated the tourist accommodation tax, effective from January 2024. Hotels and guesthouses are now required to charge a fee of ISK 600 (approximately €4.24) per room per night, with campsites and mobile homes charged half the price. Cruise passengers arriving at Icelandic ports are also subject to a separate ISK 1,000 (€7.06) tax.

However, tourism officials, including Jóhann Viðar Ívarsson from the Icelandic Tourist Board, have indicated that these taxes have not brought significant revenue to the government. As such, the government is planning to propose a considerably higher tourist tax in the coming weeks to better capture the value generated by tourism and help fund sustainability efforts.

While the new tax increase has not been fully implemented yet, it is expected to help the country better manage the environmental and infrastructural challenges caused by rising visitor numbers. According to Viðar Ívarsson, the government is keen to ensure that the tourism sector continues to thrive while balancing environmental sustainability and the needs of local communities.

Iceland’s Efforts to Promote Sustainable Tourism

To mitigate the environmental impact of tourism, Iceland’s government is focusing on promoting sustainable travel practices. These initiatives include increasing eco-friendly transport options, investing in green energy, and supporting local businesses that promote environmentally responsible tourism.

For example, the Westfjords, a less-visited part of the country, is being promoted as a hidden gem for travelers looking to avoid the crowds in more popular areas like Reykjavík and Golden Circle. The Westfjords offer dramatic coastal mountains, fishing villages, and pristine landscapes, making it an ideal destination for those seeking an authentic Icelandic experience.

Iceland’s Ring Road infrastructure also ensures that travelers can explore the northern and remote regions of the country year-round. Visitors are encouraged to explore these areas to avoid overcrowding and help preserve the country’s fragile ecosystems.

How Tourism Tax May Affect Future Growth of Iceland

As Iceland continues to experience a record number of visitors, the proposed increase in the tourist tax is a sign of the government’s desire to ensure the long-term viability of the tourism sector. The increased tax revenue is expected to be reinvested in preserving Iceland’s natural beauty, improving tourism infrastructure, and supporting the local economy.

However, there are concerns that increasing taxes could deter some travelers, particularly those on a budget. The government is working to balance the benefits of a higher tax with the need to maintain Iceland’s position as a premier destination for tourists from around the world.

Conclusion: Tourism Future of Iceland

With its growing popularity and rising visitor numbers, Iceland is preparing for a future in which it must carefully balance tourism growth with environmental sustainability. While the proposed increase in tourist tax will play a key role in addressing these challenges, it is also essential that Iceland continues to develop innovative solutions to manage tourism’s impact on its unique ecosystems. As the country looks ahead to future growth, it will continue to attract tourists eager to experience its unparalleled natural beauty, ensuring that Iceland remains a top destination for years to come.