Iceland’s push to position itself as a transatlantic hub for tourism, infrastructure and investment is gaining momentum, with the K64 masterplan at Keflavík Airport emerging as a focal point for international capital, particularly in the hotel sector.
At the centre of the initiative is Keflavík Airport Development Company (KADECO), which is spearheading a long-term vision to transform land surrounding Keflavík International Airport into a mixed-use economic zone. Managing Director Pálmi Randversson has been heading promotion of the project to investors, presenting Iceland as a strategic “bridgehead between Europe and the US” with strong fundamentals for hospitality growth.
The K64 scheme — named for its position along the 64th parallel north — is located on the Suðurnes Peninsula, approximately 50km from Icelandic capital Reykjavík. Traditionally the gateway for international arrivals, the area is now being redrawn as a fully integrated business and tourism ecosystem. KADECO, in collaboration with the Icelandic state, airport operator Isavia and the municipality of Suðurnesjabær, has developed a masterplan that spans aviation services, data centres, light industry, offices, residential development and, increasingly, hospitality.
Iceland’s hospitality economy
The timing reflects a broader resurgence in Iceland’s tourism economy. After pandemic-era disruption, visitor numbers have rebounded sharply, with Keflavík Airport expected to handle around nine million passengers in 2026. The country is now welcoming approximately 2.3 million international visitors annually – a figure that exceeds the national population of around 400,000 people by more than fivefold.
“Our role is to be a one-stop shop for investors, not only selling the land but also leading them through the regulations and legal processes,” Randversson said. “We have already developed land around aviation, data centres, agriculture, light industrial and commercial and we are also looking to build residential and support workers. The only asset class we are not seeking is heavy industry.”
Hospitality is becoming an increasingly prominent pillar of the K64 vision. The corridor between Keflavík Airport and Reykjavík has already seen a wave of hotel openings in recent years, catering to transit passengers, short-stay tourists and airline crews. Randversson notes that additional projects are in the pipeline, with the goal of creating a continuous hospitality offering that complements both the airport and the capital.
That approach reflects a deliberate effort to lower barriers to entry in a market often perceived as complex due to planning rules, environmental considerations and its relatively small scale by European standards. By pre-zoning land and coordinating infrastructure, KADECO aims to accelerate development timelines, making it an attractive proposition for hotel investors seeking quicker routes to market.
K64 And Reykjavík
“We are looking at K64 having its own ecosystem and being connected with Reykjavík and we also have the growing hospitality sector, with a number of hotels already developed on the highway to Reykjavík and more hotels on the way,” he said.
Rather than positioning K64 as a standalone airport district, KADECO is framing it as an extension of the wider region and one that can support overflow demand, diversify accommodation types and provide new opportunities for branded hotel operators. The proximity to Iceland’s main international gateway also aligns with the popularity of airport-linked developments, particularly in markets with strong stopover traffic.
Sustainability is another key selling point. Iceland’s energy system, powered largely by geothermal and hydroelectric sources, gives it one of the lowest carbon footprints globally. Randversson emphasised that much of the land within K64 is already zoned for development, reducing both regulatory uncertainty and environmental impact compared with greenfield projects elsewhere.
Reykjavík Iceland’s Focal Point
Beyond K64, Reykjavík itself remains a focal point for the country’s hotel investment market, with the capital accounting for the majority of Iceland’s room stock, and it continues to attract both leisure and business travellers, drawn by its cultural attractions, nightlife and role as a base for exploring the country’s natural landmarks.
According to Statistics Iceland, revenue from foreign tourists increased by 4% in 2025, with the number of overnight stays at hotels in Iceland in March (the most recent figures) at nearly 432,000, approximately 2.8% up on March 2025. Foreign overnight stays in hotels were approximately 385,000, or 89% of total overnight hotel stays, ahead 4.9% on the previous year.
Overall supply of hotel bedrooms increased by 2.6% in the country in March across 175 hotels nationally, with a total of 12,353 rooms. Of the total, 58 hotels are in the capital region, with a total of 5,659 rooms and it also saw the highest occupancy rates (71.8%). Reflecting increased demand, room expansion is expected to see its first material change for over five years during 2026.
Conversions Dominate New Schemes
Indeed, Reykjavík has seen a steady influx of international hotel brands, alongside the expansion of domestic operators. However, development in the city is often constrained by limited land availability, strict planning controls and a desire to preserve the character of the urban environment. As a result, new projects tend to be smaller in scale or involve the conversion of existing buildings rather than large-scale new builds.
One such example is IHG Hotels & Resorts (IHG), which late last year confirmed its first signing in Iceland for its midscale long-stay brand Candlewood Suites, located in Reykjavik’a Hlíðar district. The 53-key property will be converted from a former office building.
Signed as part of an agreement with ALVA Capital, IHG is looking to develop up to 500 rooms across Iceland over the next three to five years for IHG brands including Holiday Inn Express and Garner hotels and Willemijn Geels, Vice President, Development, Europe, IHG Hotels & Resorts, added: "This deal holds great potential for IHG to grow across the country.”
Supply constraint has supported relatively strong occupancy rates and average daily rates, making Reykjavík an attractive market for investors despite higher entry costs. The city’s seasonality, long a challenge for operators, is also gradually smoothing out, with winter tourism growing as visitors seek experiences such as the northern lights and geothermal spas.
The airport corridor offers opportunities to capture different segments of demand, including short-stay visitors, early departures, late arrivals and price-sensitive travellers. It also provides space for larger developments that would be difficult to accommodate in the city centre.
The fundamentals appear strong: rising passenger numbers, a supportive regulatory framework, abundant renewable energy and a growing tourism base. As Randversson put it, after several years of groundwork, the project is now “investment-ready” and hospitality is set to play a central role in its evolution.