Tourism in Iceland has experienced unprecedented growth since 2010, resulting in a rise in occupancy levels in the country’s hotel supply and prompting alternative accommodation, like Airbnb, to flourish, according to a new report from global hotel consultancy HVS.
Occupancy rates grew 36 percent between 2010 and 2015, with Reykjavik and outlying regions up 42 percent. Occupancy in the capital of Reykjavik grew from 55 percent in 2010 to 79 percent in 2015.
According to data provided by Benchmarking Alliance, Reykjavik is becoming one of the strongest performing cities in the Nordics with the highest occupancy in the first quarter of 2016, the strongest rate in Q2, and outperforming other Nordic capitals in Q3.
Room supply has increased 11 percent between 2010 and 2015, and by an annual 6 percent in Reykjavik, where lifestyle properties such as 101, Hotel Bork, and Canopy by Hilton have opened. The current development pipeline over the next three years of around 2,000 rooms still falls short of demand.
However, the report warns that such an explosion of the sharing economy combined with a hefty hotel development pipeline could pose a threat to the hotel market, particularly if tourism growth were to slow, or even decline.
“The growth of Airbnb in Iceland hasn’t affected hotel occupancies yet, but it has created a low-cost alternative, which can limit [a hotelier’s] ability to drive average rates during peak seasons, despite high occupancies,” says HVS London senior associate Stephen Collins. “Once hotel room supply begins to catch up with demand, it will prove to be interesting to see whether hotels are able to reclaim the unaccommodated demand that had previously been forced into alternative accommodations when hotels were full.”