Iceland’s cruise industry expects significant losses

The stark volcanic vistas and geothermal wonders that beckon Iceland to travelers may soon become unusually quiet, as cruise lines appear to be seriously considering abandoning the jewel of the North Atlantic. Cruise Iceland, a trade group for local port operators, tourism businesses, and other related trades, has expressed concern that the newly implemented passenger tax – which comes into force in early 2025 – looks set to trigger a series of cancellations, thereby cutting bookings in some key Icelandic ports by more than half by 2027.

The tax, which charges 2,500 Icelandic kronor (about $18.50) per cruise passenger, has prompted operators to consider rerouting to destinations like Norway or even Greenland that do not have such a tax. “This tax really scares away the boats that really support our remote communities.” A spokesman for Cruise Iceland said, highlighting the profound impact on Iceland’s smaller, more remote ports. Early forecasts do not suggest great results: perhaps a 17% drop in total ship visits by 2026 and an even more significant 37% drop in 2027, when compared to healthy shipping numbers in 2024.

The distant mortars were very hard

The impact appears to be most severe in remote areas of Iceland, where cruises are often an important part of the economy. Consider Borgarfjörður Estri, a fjord-filled region on Iceland’s east coast: At one point expecting 28 bells in 2027, it is now expected to have just one. A similar decline is felt in a deeper impact in ports such as Seyðisfjörður and Grundarfjörður, where income from tourism provides everything from small family shelters to local fishing.

When tonnage is considered – a measure that reflects the overall size of the cruise industry – the decline is also significant: 12% fewer ships arrived in 2026, which may drop to a 23% decline in 2027. From large megaliners to small ships,” notes the Cruise Iceland analysis. The organization cites estimated economic losses of around 1,698 million Icelandic kronor (which is roughly $12.5 million) per year – a number that is very close to the government’s expected tax revenue of around $10 million per year.

A zero-sum gamble on a fair game?

Those in favor of the tax have proposed it as a way to level the playing field, to help pay for additional demands on infrastructure due to increased tourism. Even so, critics have called it a broad-brush tool that puts Iceland’s cruise industry at a disadvantage. At 525% of the cost of a typical hotel room for two, the tax “creates unequal competition between land and cruise ships,” Cruise Iceland suggests, potentially undermining the diversity the policy aims to support.

As cruise schedules become stronger, the effects may extend beyond Icelandic ports: job losses in travel services, transportation, as well as hospitality; Less income comes from abroad; And perhaps a setback to Iceland’s recovery in tourism since the pandemic. With 2026 approaching, calls for reconsideration are growing — perhaps exemptions for cruise lines that focus on environmentally friendly practices, or offering discounts at rural destinations — to help protect a segment of the economy that, before taxes, appears to be showing steady growth. Iceland’s enduring appeal is due to its mix of volcanoes and ice.

Currently, Iceland’s cruise schedules appear to be empty, serving as a reminder of how a goodwill tax may negatively impact the path of a thriving industry.