Baltic Journal of Economic Studies 17 Vol. 10 No. 3, 2024 This is an Open Access article, distributed under the terms of the Creative Commons Attribution CC BY 4.0 1 University of Akureyri, Iceland E-mail: hafdisb@unak.is ORCID: https://orcid.org/0000-0001-5258-515X 2 University of Akureyri, Iceland (corresponding author) E-mail: helga@unak.is ORCID: https://orcid.org/0000-0002-8857-8063 DOI: https://doi.org/10.30525/2256-0742/2024-10-3-17-25 ISLAND TOURISM AND COVID-19: BUTLERS TOURISM AREA LIFE CYCLE, CULTURE, AND SWOT ANALYSIS Hafdís Björg Hjálmarsdóttir1, Helga Kristjánsdóttir2 Abstract. The purpose of this current research is to study island tourism during the COVID-19 pandemic. A unique island in the North Atlantic Ocean, in the Arctic region, was chosen to analyse island tourism. It is a European country, Iceland, located near the North Pole, at the "top of the world". In contrast to the well-known concept of sand island tourism, Iceland can be said to offer snow island tourism. In this remote area, the economic slowdown became noticeable somewhat later than in other regions of the world due to the COVID-19 pandemic. The methodology chosen to be presented in this study involves the use of a SWOT analysis to help clarify business strategy, applied to shed light on the strengths, weaknesses, opportunities and threats to a small open economy in the wake of the COVID-19 pandemic, focusing on island tourism, with a tourist destination located in the middle of the North Atlantic Ocean, almost equidistant from the US and Europe. The tourism industry in Iceland has grown substantially in recent years and has become the most important sector of the Icelandic economy in recent years, generating significant foreign exchange earnings for the country. In this analysis, tourism exports are presented as a share of GDP in line with international economic theories. Additionally, the country case study is considered in conjunction with the Butlers Tourism Area life cycle and culture in the analysis. The results of the SWOT analysis indicate that, when considering the strengths, weaknesses, opportunities and threats faced by the market, the overall growth potential of the market is significant. Practical implications include the need to strengthen the infrastructure further to best supply tourism opportunities. New opportunities are seen in online advertising, social media, digital marketing, food culture and historical culture, as well as sustainable and renewable resources. In addition, more attractions and pedestrian areas, as well as improved ski resorts. The value / originality of this study is somewhat unique, as it analyses island tourism, showing the successful development of tourism after the COVID-19 pandemic on remote islands in the North Atlantic Ocean. Ultimately, the summary and conclusions provide an overview and suggestions to consider when looking for ways to successfully promote tourism in the post-COVID crisis market. Keywords: COVID-19 pandemic, European tourism, SWOT analysis, marketing, international trade and investment. JEL Classifications: F10, F11, M10, M20, M30 1. Introduction The aim of this current research is to study island tourism. Researchers have analysed the concept of sand island tourism (Aguilo, Alegre and Sard, 2005), however this current paper studies an island that some would say applies more to the concept of snow island, the country in question is Iceland. Tourism during COVID-19 has made everyone live in a new era (Duro, Laborda, Turrion-Prats, Fernández-Fernández, 2021) where the world is increasingly becoming a global village, teaching people that what affects one can affect the whole, and in this sense all people are in this together. From the most densely populated places in China to some of the least densely populated places, such as Iceland. Iceland has only three inhabitants per square kilometre (European Environment Agency, 2020). The aim of this research is to focus on the COVID-19 pandemic and the country of Iceland, and to explore opportunities in tourism marketing to respond to the impact of the COVID-19 pandemic (Gössling, Scott, and Hall, 2021; Shapoval, Hägglund, Pizam, Abraham, Carlbäck, Nygren, Smith, 2021). The focus on the small open economy of Iceland as a sample country in this Baltic Journal of Economic Studies 18 Vol. 10 No. 3, 2024 research provides an interesting study of island tourism flows (Kristjánsdóttir, 2017). This is due to Iceland's location in the middle of the North Atlantic, almost equally distant from mainland Europe and the United States, and its reliance on air connections for tourists. This has led to limited foreign direct investment in the hotel industry (Kristjánsdóttir, 2016a), and to some extent to the Butler Tourist Area Cycle of development (Kristjánsdóttir, 2016b). Lonely Planet's travel experts have chosen Iceland as the third best place to visit in 2019, with its remote coastlines (Lonely Planet, 2020). The total area of Iceland is 103,000 km2 (square kilometres). The country has a population of around 364.000, 2/3 of whom live in the capital area, and almost all of Iceland's inhabited areas are located in the coastal areas of the country. Iceland is one of the least densely populated countries in the world with around three inhabitants per km2 (European Environment Agency, 2020). The export potential is subject to various issues, including culture, as shown in research analysing the impact of Hofstede's national culture on international trade (Kristjánsdóttir, Guðlaugsson, Guðmundsdóttir and Aðalsteinsson, 2017, 2020). Tourism is particularly important to the Icelandic economy as it was the main export industry before the 2020 COVID-19 crisis, even though tourism taxes are higher than in other European countries (Kristjánsdóttir, 2019, 2020). The 2008 crisis hit this small economy particularly hard (IMF, 2018, 2020), causing one of the deepest recessions of any country in the world, with an interesting connection to the tourism cycle designed by Butler (Kristjánsdóttir, 2016b). Hence, this paper is an effort to study and identify the opportunities in the current COVID-19 crisis. Given how heavily Iceland depends on tourism, the tourism industry needs to send the right message in the wake of the crisis (Hjálmarsdóttir and Kristjánsdóttir, 2018). "According to the Icelandic Tourist Board surveys, one of the main reasons visitors come to Iceland is because of the distinctive nature"…"Visitors come with certain expectations to Iceland"…"The authors chose tour operators from public and private sectors and analyzed their promotion material, and the way they promote themselves according to the theories of IMC" (Hjálmarsdóttir and Kristjánsdóttir, 2018). One of the novelties of this paper is the presentation of a SWOT analysis. How can Iceland assess the situation to deliver the right message? Consider several factors influencing tourism, combined with tourism marketing according to Michael Porter (1979). This article provides a SWOT analysis for the remote country of Iceland. The strengths, weaknesses, opportunities and threats are analysed. The SWOT matrix is used for the analysis and it is found that the basic expectations do not need to be changed. 2. Literature From an economic point of view, tourism can be divided into three main types: first, inbound tourism, also known as active tourism, which includes visits and stays by non-residents on the economic territory Graph 1. Toursm share in Iceland Source: Statistics Iceland (2023a) Baltic Journal of Economic Studies 19 Vol. 10 No. 3, 2024 of a given country. Second, domestic tourism, i.e., tourism by citizens of a given country on its own territory. Third, outbound tourism (passive tourism), including visits and stays of residents outside the territory of a given country (Lejsek, 2018). The SWOT matrix makes it possible to study the strengths, weaknesses, opportunities and threats after the COVID-19 pandemic. Several researchers have analysed the SWOT matrix (Menon et al., 1999; Hill and Westbrook, 1997; Koch, 2000; Chermack and Kasshanna, 2007; Porter, Argyres and McGahan, 2002). Economic studies have attempted to analyse the impact of the crisis in a small open economy such as Iceland (IMF, 2018, 2020; Krugman, 2011; World Bank, 2021). Prior to the pandemic, Iceland experienced significant growth in tourism and investment with increasing returns to scale (Krugman, 1991; Kristjánsdóttir, 2016a, 2016b, 2017), and economists have sought to study the effects of taxation (Kristjánsdóttir, 2019, 2020), culture (Hofstede, 1980, 2001; Hofstede and Bond, 1988; Kristjánsdóttir, Guðlaugsson, Guðmundsdóttir and Aðalsteinsson, 2017, 2020), and volcanic activity (Kristjánsdóttir H. and Kristjánsdóttir S., 2021). Researchers have also applied the knowledge capital model, taking into account skilled labour (Markusen et al., 1996). In addition, distance has been taken into account using the gravity model and Iceland (Bergstrand, 1985; Distance Calculator, 2020). Research has examined the effect of culture (He, Li, Lian and Zheng, Figure 1. Development of export industries in Iceland, the most important of which is tourism Source: Statistics Iceland (2023b) Figure 2. Tourists 2002-2021. Seasonal changes Source: Statistics Iceland (2023c) 0 50 000 100 000 150 000 200 000 250 000 300 000 350 000 400 000 20 02 0 3 20 02 0 9 20 03 0 3 20 03 0 9 20 04 0 3 20 04 0 9 20 05 0 3 20 05 0 9 20 06 0 3 20 06 0 9 20 07 0 3 20 07 0 9 20 08 0 3 20 08 0 9 20 09 0 3 20 09 0 9 20 10 0 3 20 10 0 9 20 11 0 3 20 11 0 9 20 12 0 3 20 12 0 9 20 13 0 3 20 13 0 9 20 14 0 3 20 14 0 9 20 15 0 3 20 15 0 9 20 16 0 3 20 16 0 9 20 17 0 3 20 17 0 9 20 18 0 3 20 18 0 9 20 19 0 3 20 19 0 9 20 20 0 3 20 20 0 9 20 21 0 3 Tourists in Iceland, showing seasonal changes in 2002-2021 Baltic Journal of Economic Studies 20 Vol. 10 No. 3, 2024 2020) based on Hofstede's culture measure. When considering tourism evolvement, an S-shape curve can be considered, as explained in Kristjánsdóttir's (2016b) article on Butler's Tourist Area Cycle of Evolution. Previous analysis of tourism in Iceland (Kristjánsdóttir, 2016b) supports the hypothesis that tourist destinations follow the S-shape of tourism evolution over time: "Data on the dependent variable tourists include the number of tourists arriving in Iceland. The data on tourists are from the Icelandic Tourist Board (2012), cover the period 2003-2011, and include over 93% or more of foreign visitors who pass through Keflavik International Airport each year and register their nationalities" (Kristjánsdóttir, 2016b). The development of tourism in Iceland in recent years supports this theory, both before (Figure 4) and after (Figure 5) the COVID pandemic. Figure 4 shows the number of tourists over the period from 1949 to 2011 (Kristjánsdóttir, 2016b). Davidescu et al. (2021) examines the cultural activities of Hofstede. Davidescu et al. (2021) conduct an analysis using gravity models based on panel data and scenario forecast simulations for Romanian exports in the context of COVID-19. Tourism as a percentage of total exports, describing two scenarios including a V-shaped economic recovery and a U-shaped recovery. It will be of interest to observe whether Iceland will experience a U-shaped rather than a V-shaped recovery, based on the graph in Figure 6. Graph showing whether Iceland will experience Figure 3. Daily COVID-19 cases and deaths, Iceland Source: Our World in Data (2021) Figure 4. Number of inbound tourists in Iceland in the time period 1949-2011 Source: Statistics Iceland, 2012 Baltic Journal of Economic Studies 21 Vol. 10 No. 3, 2024 a recovery in the period 2018-2021. The graph is somewhat U-shaped, but the dashed line showing the time trend indicates a V-shaped recovery. 3. SWOT Matrix (Strengths Weaknesses Opportunities Threats) Matrix Setup A SWOT analysis is used to assess future opportunities and possible constraints. SWOT analysis shows strengths, weaknesses, opportunities and threats, which is useful for marketing potential. Analysis of the SWOT matrix indicates that tourist expectations may be similar after the crisis. COVID-19 is likely to have a long-term impact on tourism globally. It is likely that future tourists will look for destinations with open and large spaces, where people are not necessarily interested in living in densely populated areas with huge hotels. It is expected that tourists will come here for a sense of remoteness, peace and quiet, and many of them will travel privately. It can be assumed that tourists will value clean air and clean water, as well as easy access to quality healthcare. Travel companies and airlines should do their best to bring travellers back to attractive destinations, possibly by offering them reduced airfares. Figure 5. Tourists in Iceland, over the period 2018-2021. The dotted line is a time trend Source: Statistics Iceland (2023d) -50 000 0 50 000 100 000 150 000 200 000 250 000 300 000 350 000 20 18 1 2 20 19 0 1 20 19 0 2 20 19 0 3 20 19 0 4 20 19 0 5 20 19 0 6 20 19 0 7 20 19 0 8 20 19 0 9 20 19 1 0 20 19 1 1 20 19 1 2 20 20 0 1 20 20 0 2 20 20 0 3 20 20 0 4 20 20 0 5 20 20 0 6 20 20 0 7 20 20 0 8 20 20 0 9 20 20 1 0 20 20 1 1 20 20 1 2 20 21 0 1 20 21 0 2 20 21 0 3 20 21 0 4 20 21 0 5 20 21 0 6 SWOT analysis for Iceland with regards to the COVID pandemic STRENGTHS – Tourists come to experience remoteness. – Private travel is common – Quietness – Peace and security – Clean water in all wells – Clean agricultural products – Local hospitality – Culture of authenticity – Legal environment and stability – Unspoilt and clean renewable nature – Good healthcare – Snow tourism with potential for skiing WEAKNESSES – High price of the hotel – High flight costs – Limited access in winter – Limited infrastructure – Limited number of attractions and pedestrian areas – Long-term policy in access pricing – Difficult access in winter due to snow OPPORTUNITIES – Online advertising, social media and digital marketing – Square kilometre per person in Iceland – Individual trips in the country – Sightseeing and hiking routes – English language skills of the locals – Food culture and historical culture – Sustainable and renewable resources – Geothermal pools throughout the country – Snow tourism with growing skiing potential. – Improvement of ski resorts THREATS – Foreign competition – Dangerous weather – The worldwide spread of diseases such as COVID-19 pandemic – Unprofessional marketing message – Natural hazards, volcanic activity, etc. – Avalanche due to snow Baltic Journal of Economic Studies 22 Vol. 10 No. 3, 2024 Figure 6. International travel controls during the COVID-19 pandemic, Feb 12, 2021 Source: Our World in Data (2021) Figure 7. Total COVID-19 tests per 1,000 people Source: Our World in Data (2021) Baltic Journal of Economic Studies 23 Vol. 10 No. 3, 2024 The authors believe that the weakness of the SWOT analysis is the long-term pricing policy, as there is still a lack of common agreements and solidarity on pricing, such as nature passes, airport arrival fees, tourism tax or overnight hotel fees. Over the past ten years, Iceland has experienced an explosion in tourism. This break in the influx of tourists should encourage policymakers and stakeholders to strengthen infrastructure and finally agree on an access fee to better prepare for tourist visits in the near future. 4. Results and Сonclusions This study focuses on the small open economy of Iceland, an island in the middle of the Atlantic Ocean, isolated by the COVID pandemic that has spread across the world. The authors aim to analyse the situation in the small open economy of Iceland in the hope that it will be useful for other economies by considering a SWOT analysis. The conclusions of the analysis indicate that there are several things that the tourism industry needs to consider. Strengths include the fact that after COVID, tourists come to experience remoteness, as in Iceland, snow island tourism has great potential with many fjords and mountains, and it is easy to travel privately, in peace, quiet and safety, with clean water in all facilities and clean agricultural products. Strengths also include local hospitality, authentic culture, legal environment and stability, unspoilt and clean renewable nature. However, weaknesses include high hotel prices, high airfares and limited access in winter, as infrastructure is limited to a few sightseeing sites and hiking trails, and there is a need for a more long-term pricing policy. The authors believe that now is the time to find a solution and agree on an access pricing policy, as well as strengthen the infrastructure to be ready to receive tourists after this crisis. Opportunities include the growth of snow island tourism, online advertising, social media and digital marketing, as well as Iceland's large number of square kilometres per person, private travel in the country, attractions and walkways, English language skills of locals, culture linked to food and history, sustainable and renewable resources, and swimming pools across the country for leisure, socialising and sports. Threats include foreign competition, adverse weather conditions, the global spread of diseases such as the COVID-19 pandemic, unprofessional marketing messages, natural disasters, volcanic activity, etc. This can be seen as one of the strengths of how the Icelandic government and health authorities have handled the coronavirus, or COVID-19. They have made quick decisions using few but effective methods to ensure that this pandemic is not as severe as it seems in some other countries and that the healthcare system continues to function. These methods include paid quarantine and excellent coordination. It showed that cooperation between medical professionals, police, government and others was incredibly important. Not to mention the emphasis on full transparency. Daily press conferences by the Health Department, the police, the Red Cross and others ensured that truthful and correct information was provided. No other country has conducted more testing, or conducted very limited amounts of it. Probably due to the small population in Iceland, it was easier to get people to follow instructions and receive information. In general, it is believed that a small open economy has the ability to successfully recover from the COVID-19 pandemic, given the strengths, weaknesses, opportunities and threats. 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