Tourist boom expected for Reykjavik as holiday prices plunge by 40 per cent

Iceland has became one of the most affordable holiday destinations overnight after its currency nose-dived following one of the worst days for the world's stock markets.

The Nordic country, which was seen as one of the most expensive shortbreak destinations, saw its currency collapse 23 per cent in just one day.

Prices for attractions and rooms in the capital Reykjavik's top hotels have fallen by up to 40 per cent as the krona crashed from to 256 kronas per pound compared with 158 a month ago.

Experts are expecting a mini-tourist boom to the Northern Lights, Blue Lagoon and glaciers in the wake of massively reduced prices.

A five-night tour in Lake Myvatn for the Northern Lights will now cost £440 per person, compared with £718 before the fall. Spa treatments at the world famous Blue Lagoon have dropped almost 40 per cent.

Prices at top hotels have also dropped, with rooms at one of the capital's top four star hotels, Hotel 101, now costing £164 (41,900kr) per night compared with £265 in September.

A night at the four-star Hotel Budir, including a three course dinner, now costs £98 (25,000kr) instead of £158.

Tourists can now enjoy a threecourse meal with wine at any of the top Reykjavik restaurants - including the Domo, Seafood Cellar and Orange - for between £55 (14,000kr) per person rather than the previous £89.

The higher-end bars of Reykjavik have also become more affordable, with the average price of a pint now £3.50 instead of £5.60.

Experts have warned the prices may not stay low for long. But Elinar Valur, spokesman for Hotel 101, said: "Some of the hotels are already putting up their prices in kronas to compensate. But the fall should still be good news - this will make us a much more appealing destination for tourists."