Iceland is set to become one of travel's hottest destinations in 2009, with prices for summer holidays cut in half.

The collapse in the country's economic system has seen Iceland's travel industry cut prices to encourage tourists.

According to Google, searches for travel to Iceland have risen by more than 60 per cent in the past two months, with most inquiries coming from the UK.

One tour operator, Cox & Kings, today put on sale a three-night city break at the Hotel Frón in Reykjavik from £350pp including flights.

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Product manager Michael Fleetwood said: “Prices are falling dramatically – typically, our short city breaks during the peak summer season have been around £700-£800 per person.

"For summer 2009, we have breaks for just £395. Iceland has stunning natural landscapes, museums and galleries, and the latest economic downturn will open up the destination to those previously put off by costs.”

A travel website, www.go4travel.net, today also released cut-rate prices for hotels including the four-star Reykjavik Centrum from £73 for a double room, including breakfast. And Iceland Express also has one-way flights from £69.

* National airline Icelandair is cutting rates for Thorrablot - Iceland’s annual mid-winter Viking feast - when Iceland’s notorious delicacy hákarl (rotten shark) is on the menu from January 25 – February 23, 2009.

Other Viking dishes include boiled sheep’s head (svið) and congealed sheep’s blood wrapped in a ram’s stomach (blóðmör) washed down a stiff shot of schnapps. Participating restaurants in Reykjavik including Restaurant Reykjavik and Mulakaffi

Icelandair is offering packages from £199pp including return flights from Manchester or Heathrow' three nights hotel accommodation and entrance to Laugardalslaug, Iceland's biggest geothermal swimming pool.

A spokesman for Icelandair said the airline is concentrating its efforts on overseas markets because of the drop-off of Icelandic people travelling overseas.

The airline had an advertising campaign in the pipeline before the crash - English versions will now will be used in UK and US, thei country's main markets.

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