Why Is Iceland So Expensive?
Have you ever dreamt of exploring the stunning landscapes and natural wonders of Iceland? The breathtaking glaciers, powerful waterfalls, and awe-inspiring geysers may be calling your name. However, when you start to research the costs of a trip to Iceland, you may find yourself wondering why it seems so expensive.
Figuring out your Iceland trip cost may come with some sticker shock. Whether you’re joining an organized tour or renting a car and doing it yourself, it’s not uncommon for the average cost of a trip to Iceland per person to add up to $500-800 or more per person per day. A 3-4 star hotel alone can run $500/night. Yikes!
But before we throw the baby out with the (ice)water, let’s explore just why Iceland is so expensive.
In this blog post, we will share why traveling to Iceland can be costly, from the high cost of living to the country's remoteness and unique environmental conditions. Understanding these factors can help you better plan and budget for your Icelandic adventure. So, let's dive in and uncover the reasons behind the high price tag of a trip to Iceland.
Iceland Trip Cost: 5 Reasons Why Iceland Is more expensive than other places to travel
Sturlureykir Horse Farm - Jim Hill
The cost of living is higher. According to Numbeo.com, the cost of living in 19% higher than the US. Iceland Magazine found that consumer prices are 66% above the European average.
It’s an island with a cold climate - which means that nearly everything needs to be imported, from fuel to food to commodities, and often have taxes and cargo fees attached, then passed along to the consumer. Its Arctic climate is not the most agriculture friendly, though to be fair there is an awesome tomato greenhouse farm on the island that provides nearly all of its tomatoes (true story!).
VAT is at 24%. Americans aren’t always familiar with the term VAT (Value Added Tax), but if you translate that into sales tax then it makes sense. And Iceland is among the highest in Europe, meaning that goods and services are taxed (with some exceptions of a lower rate on some food items). Take note though that some purchases are eligible for a VAT tax refund upon exit.
Minimum wage and labor laws - are employee-forward, with minimum wage around $15 USD per hour and many labor unions. In tourism, there are strict rules around how much guides and drivers can work, including the consecutive hours they are on the job and the required amount of break time each day. Speaking of, tourism itself has increased the costs in Iceland with a higher demand for labor and at times shortage in supply.
Limited tourism infrastructure & seasonal demand. While Iceland has become a popular tourist destination in recent years, the country's tourism infrastructure is still relatively new and limited. This can lead to higher prices for things like accommodations and transportation. Additionally, many of the country’s top attractions such as the Northern lights are only available during certain times of the year. This can create high demand for travel during peak seasons, driving up prices for flights, accommodations, and activities.
While traveling to Iceland can be expensive, there are ways to save money without sacrificing the quality of your experience.
Black Church Mountain - Jim Hill
One option is to book a group tour to Iceland instead of planning your trip on your own. Group tours can offer significant savings on accommodations, transportation, and activities, as tour operators can negotiate discounts and special rates for their clients. Additionally, group tours can help you make the most of your time in Iceland by providing expert guides and curated itineraries that ensure you see all of the country's top attractions. Plus, traveling with a group can be a fun and social experience, allowing you to meet new people and share the adventure with like-minded travelers.
Final Thoughts
Pingvelllir Geyser - Jim Hill
Iceland is an expensive destination to visit due to the high cost of living combined with its cold climate, high VAT tax rate and employee-friendly labor laws. Additionally, tourism infrastructure is still relatively new and limited, as well as seasonal demand driving up prices for flights, accommodations and activities.
However, there are ways to save money while visiting Iceland such as booking a group tour. By doing so, you can take advantage of discounts and special rates on accommodations, transportation and activities as well as save time by having expert guides and curated itineraries to ensure you don't miss any top attractions during your stay.
Despite the high cost associated with it, Iceland remains one of the most beautiful and unique vacation destinations in the world.