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10/22/2008 06:45 PM

FORGET THAILAND

Near Bankruptcy Draws Bargain-Hunting Tourists to

Iceland
By Sebastian Wieschowski

Visiting the dreamlike landscapes and wild geysers of Iceland used to be devilishly
expensive. But the financial crisis has transformed this once dear tourist destination
into a bargain trip.

A country facing its total ruin? A ban on currency exchange for locals? Empty shelves in
supermarkets? Tourists are given little indication of that when they call Iceland's Centerhotels
Group and ask sales director Niclas Bylund for tips on their planned trips to the country. "Bring
sturdy shoes," the Swede suggests in a peppy voice. "Reykjavik is a wonderful city for long walks
and hikes."

Icelanders may face a difficult future, but the country's troubles have also give tourists reason to
rejoice. Before the global financial crisis, Reykjavik was a luxury destination by Western European
standards. The island, known for its glaciers, fjords and volcanoes, was considered beautiful,
dark, cold -- and expensive.

The Economist rated Iceland as the world's most-expensive country in its annual " Big Mac
Index," a measure based on the theory of purchasing-power parity. Before devaluation of the
national currency, one euro was worth approximately 90 krona. After the crisis, Iceland's national
bank fixed the rate at 150 krona to the euro. Ordinary Icelanders are not allowed to switch money
at the moment, and the black market exchange rate is about 350 krona to the euro right now.

The local tourism industry is taking advantage of Iceland's dismal fate to advertise cheap trips to
the island. "Impending national bankruptcy can be sexy" could easily be the new motto. "In a
matter of days Iceland transformed into one of the cheapest tourist destinations in Europe," said
Clive Stacey, head of Discover the World, a travel agency that brings more than 8,000 tourists to
the country each year. In the past, his clientele tended to be a higher brow group of tourists who
were willing to spend that little extra something for a vacation that was a little more exotic.

But now Icelandic tour operators have adopted the lingo of discounters. "The record low of the
Icelandic krona invites you to discover Iceland NOW," reads a message on national carrier
Icelandair's Web site. Flights to Iceland, hotels, tours, rental cars and restaurants are "cheaper
than ever before," says the site. A flight from Frankfurt to Reykavik currently costs about 36,000
krona -- the equivalent of about €400 ($515) prior to the crisis, but closer to €120 now.

"The Island Everyone Can Afford"

Icelandair isn't alone in trying to exploit the specter of the country's bankruptcy to lure foreign
tourists. "Anyone who wants to travel cheaply to Iceland should do it now because the Icelandic
krona is so favorable at the moment for tourists." It goes on to vaunt Iceland as "the island
everyone can afford." The tourist office's marketing experts are also pushing Reykjavik as the
ideal destination for a bit of Christmas shopping, a city where you can find "Icelandic and
international brands at affordable prices."

Indeed, you could forgive tourists walking around the Icelandic capital for suddenly thinking they
had been trasported to Eastern Europe. Pre meltdown, a pint of beer used to be quite an
investment, with a hefty price of about €7 ($9). At the current exchange rate, however, the 500 to
700 krona price for a good lager is the equivalent of about two euros, cheaper than the price in a
lot of bars in Prague or Warsaw. And a cheeseburger that once cost a proud 220 krona (€2.40),
can now be had for 80 cents. Cocktails will set you back by about four to six euros, and you can
rent a car for less than €200 per week.

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Tourists are experiencing the same phenomenon of dropping prices when they book hotels.
"Iceland just became very affordable!" Iceland's national hostel organization recently announced.
Visitors with youth hostel ID cards can stay overnight for around 1,850 krona, about €6 at the
current exchange rate. A four-hour guided tour of the spectacular surrounding Reykjavik costs
7,100 krona, about €20.

For the youth hostel organization, the upshot of the precarious situation is this: "If you always
wanted to come back to Iceland, now is your chance."

'The Prices Aren't So Bad'

For their part, hoteliers don't think tourists are taking much notice of the crisis that's consuming
Reykjavik. "You can already tell that Icelanders are watching their spending, but things aren't
nearly as bad as the press is reporting them to be," CenterHotels Byland told SPIEGEL ONLINE.
"Most Icelanders haven't been hit too hard by the events," he said.

Byland's hotels are already seeing rising interest from international tourists. "In the short-term we
have about the same number of bookings as we did this time last year," said Byland. "But
inquiries about next year are far greater than they have been for this year."

Meanwhile, the first bankruptcy tourists are arriving in Iceland. "I was in Iceland last week and it
was already getting cheaper," said tour operator Stacey, who has been visiting Iceland for the
past 35 years. "For the first time I looked at a menu in a restaurant and thought: The prices really
aren't so bad."

URL:

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http://www.spiegel.de/international/europe/0,1518,585465,00.html
When Vikings Tremble: Panic at Iceland's Banking Counters (10/13/2008)
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RELATED INTERNET LINKS:

Economist: Big Mac Index

http://www.economist.com/markets/bigmac/index.cfm
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