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Iceland's famous Blue Lagoon thermal pool. Photo: SHUTTERSTOCK
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Iceland is betting on its soccer fans' famous Viking thunder-clap celebrations to provide a vitamin shot for its flagging tourism sector.

With a population of about 350,000, Iceland is the smallest country to have ever qualified for a World Cup.

And despite being considered a favourite second team among global fans, few expect it to get past the group stages of the tournament, which pits the north Atlantic amateurs (the coach is a dentist) against mighty Argentina, Croatia and Nigeria.

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Iceland fans perform their famous 'hu'-chant prior to the group D match between Argentina and Iceland at the 2018 soccer ...

Iceland fans perform their famous 'hu'-chant prior to the group D match between Argentina and Iceland at the 2018 soccer World Cup in Russia. Iceland is the smallest country to ever qualify for the World Cup. Photo: AP

For the locals, the team's presence in Russia is still viewed as a golden opportunity to revive the tourism industry, now the country's leading source of foreign exchange.

"Iceland is stepping on the big stage this summer," said Skapti Orn Olafsson, a spokesman for the Icelandic Travel Industry Association, so "we surely have a clear shot on goal to use the attention in a positive way."

The association is making the most of the World Cup, with its website inviting visitors to join President Gudni Th. Johannesson and the First Lady at #TeamIceland.

Helped in part by its location for popular films and television series like Game of Thrones, tourism has been one of the main drivers of Iceland's recovery from the financial crisis of the past decade, surpassing the fishing industry as its main export.

World's most expensive

But there are now signs that the sector has lost momentum, with the central bank pointing to a reduction in flights to Reykjavik by several European airlines in its most recent financial stability report.

More importantly, the appreciation of the krona (it has strengthened by more than 40 per cent against the euro since its 2009 nadir) has turned Iceland into the most expensive tourist destination in the world, dissuading potential visitors and prompting Landsbankinn, a leading bank, to declare that "the tourism boom is over".

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"The tide is turning," Olafsson said. "There's been a slowdown in the growth of tourists, but what is more serious is that travel companies are starting to experience a contraction."

Last month, Iceland's state-owned airport operator lowered its estimate for the number of passengers traveling to Iceland, though it is worth noting that it still predicts an increase of 15 per cent over the previous year.

Thorir Gardarsson, chairman of Gray Line, one of the island's biggest bus companies, also blames recent talks on the possible hiking of tourism taxes as a reason why "travel agencies have cut back on Iceland trips".

Not everybody's worried.

"I have been in this business for 40 years and I am very optimistic and don't see any signs of a collapse," said Thrainn Larusson, owner of Hotel Hallormsstadur. "The industry is simply reshaping a bit."

from traveller.com.au