May 22, 2025

The Blue Lagoon has become almost synonymous with Iceland tourism, accounting for 42% of Iceland’s economy. In 2022, revenue totaled ISK 16.7 billion and the profits amounted to ISK 1.3 billion.

The Blue Lagoon is the most visited tourist attractions in Iceland. The water’s milky blue hue is due to its high silica content. The silica forms soft white mud on the bottom of the lake which bathers rub on themselves. Studies confirmed that the lagoon had a beneficial effect on the skin disease psoriasis.

The Blue Lagoon is the most successful story by any nation of turning a waste land into a multibillion-dollar enterprise. Here is the backstory I discovered.

Iceland in the 1960’s was a small, isolated country that had only become independent from Denmark in 1944. The entire population was just over 180,000 people, about the size of a medium size city today, and Reykjavik was still a sleepy town. Most of the country’s economy ran on fishing and sheep farming. Rural communities were strong, winters were long and if you wanted to watch television you had to wait until 1966! It wasn’t poor exactly, but it wasn’t polished either. And when it came to energy, the country was dependent on imported fossil fuel for heating. Iceland had no financial domestic reserve. No oil. No coal. Nothing. Iceland was paying an absolute fortune just to keep warm, keep the lights on and the soup hot. But change was coming.

Some of you may remember the oil crisis of 1973. Countries in the Middle East cut oil exports to the West and gas prices quadrupled pretty much overnight. Gas stations ran dry, whole supply chains wobbled and people soon realized that energy security was a part of national security.

Every western country tried to come up with a new source of energy with varying success. But Iceland had something that most countries didn’t. It had heat, bubbling super charged underground heat. What if they stopped trying to burn oil that had to be shipped halfway around the world and instead tried tapping into the heat that was already under their feet.

Geothermal bathing had been around for centuries. Could Iceland produce thermal energy on an industrial scale? The concept was still undefined, the initial costs would be really high, but the motivation was clear. Iceland needed energy independence.

I am not an engineer, but here is how I understand thermal heating. You drill into the earth to volcanic rock where water is naturally heated by the earth’s core. The water is so hot that it produces steam. The steam could turn turbines to get electricity, and the hot water could be piped into homes. The cycle is repeated and would be much more reliable for Iceland than chasing oil tankers around the Atlantic. That is exactly what happened, and Iceland created the first Geothermal Power Plant in the world to supply both electricity and direct heating from the same source. Enough energy to heat whole towns from one source!

In 1976, Iceland actually had a geothermal reserve. Water was being piped into lava fields. Mineral rich, heated water filled with trace minerals, nothing toxic, nothing harmful would be piped into lava fields where it would drain. But the water did not drain. Milky blue, high silica content water began to gather, and people started calling it The Blue Lagoon. At first people didn’t know what to do with it, it wasn’t part of a plan, it was just there. Locals started sneaking in for a swim. The white silica mud felt good on the skin and people reported starting to feel better.

In the 1980’s the first public bathing facility opened. Dermatologists started prescribing visits for their patients and what started as an industrial puddle turned into a “treatment center.” Bottled water, skin care products, research labs, restaurants, swim up bars and numerous 5-star hotels followed. Millions of tourists from all over the world come to soak in Iceland’s beautiful mistake. All of it because some water refused to drain.

A puddle in the wrong place. Maybe this isn’t a problem but the start of something else. A happy accident. But this wasn’t just about luck but about the curiosity to pause, to see if you can create something new. In Iceland, the sheep outnumber the people, the weather doesn’t really care what you planned, a swim in a lava field can turn into the country’s #1 attraction-and completely revitalize the economy!

Iceland is not a place where everything goes according to plan, it’s a place where plans adapt. Life doesn’t always give you the thing you ordered, it may give you something weird, something that may make you sigh and say, “Now what?” Maybe it’s not a failure, maybe it’s the best thing that could have happened to us, maybe we just hadn’t recognized it yet.

Once again, it appears that Icelanders used their imagination to change a deficit into an asset. They also seemed to have learned a very important entrepreneurial lesson.

When life gives you waste water, see if you can find a way to charge admission for it!

(Chongae and I did not go to The Blue Lagoon. In our home state of Florida, we have Warm Mineral Springs, that I have visited frequently. Warm Mineral Springs is thought to be the Fountain of Youth that Ponce de Leon sought out in 1513. It has more minerals than any other Warm Springs in the world.)

Thanks for traveling with us.