Plan your Iceland trip with my advice for where to stay in Reykjavik! Learn which neighborhoods, hotels, and hostel options are good depending on your budget & goals.
As I’m sure you’re already aware by now, Iceland is an incredible holiday destination for all types of people, from families to adventurous solo travelers.
While Iceland flights have become increasingly cheap, food & lodging are not.
There are tons of unique places to stay in Iceland due to its diverse scenery, and every time I visit I find something new to experience.
For those planning a visit and wondering about the best places to stay in Iceland, I’ve put together this free guide to the country’s best areas and accommodation options!
Best Places To Stay In Iceland
When it comes to finding a place to stay in Iceland, hotels can be on the expensive side, and there aren’t many options compared to other places. However, alternatives like guesthouses can help you save money.
It’s important to book Iceland accommodation early to get the best deals.
Especially if you plan to visit during the summer high season, when finding a good place to stay can be much more difficult.
In this guide, I’ll cover everything from budget backpacker hostels to luxury Reykjavik hotels, family-owned farms, campgrounds, and even campervan rentals — you’ll learn exactly where to stay in Iceland to have a great time.
Best Neighborhoods In Reykjavik
The busy heart of Reykjavik is the downtown Miðborg neighborhood, especially Laugavegur Street, where you’ll find shopping, restaurants, nightlife and all sorts of fun things to do.
Located just west of the city center, Vesturbær is a mix of a residential neighborhood and little cafes. It’s a bit quieter than downtown.
A local working-class residential area east of the city, with plenty of parks & playgrounds. The name means “the hills” and places out here are much cheaper than the city center.
Laugardalur is kind of the sports and recreation hub of Reykjavik. Known as “the hot spring valley,” this is where you’ll find the local sports stadium as well as a campground.
Where To Stay In Reykjavik
Reykjavik is the capital of Iceland, and where most travelers base themselves from initially. The city welcomes guests with a cosmopolitan mix of restaurants, cafes, street art, museums and tour company headquarters.
If you want to be where all the action is, stay close to Laugavegur Street. But there are some other great neighborhoods in Reykjavik too, which I share below.
Here are my suggestions for the top hotels, hostels, and campgrounds in Reykjavik depending on your budget.
BUDGET: Rey Apartments
Rey Apartments is located in between the main shopping area and the trendy district of Skolavordustigur in Reykjavik. The modern, fresh looking apartments feature free wifi and fully equipped kitchens and living rooms. The geothermal Sunhollin swimming pool is just 10 minutes away!
MID-RANGE: Hotel Ódinsvé
Hotel Ódinsvé is a wonderful Iceland hotel with a window overlooking Reykjavik to enjoy magical views every day of your stay. Snaps Restaurant, within the hotel, offers tantalizing Danish cuisine. Additionally, the shoppers’ paradise, Laugavegur Shopping Street, is about two hundred meters from the hotel.
LUXURY: Kvosin Downtown Hotel
Kvosin Downtown Hotel is the place to go to be pampered while staying in Reykjavik. Housed in a restored building from the 1900’s, this boutique hotel offers the largest rooms you can find in Reykjavik, decorated in modern Scandinavian style and featuring artworks by local artists.
BACKPACKER HOSTEL: Loft Hostel
Loft Hostel Boasts two Best Hostel awards and is one of the best places to stay in Reykjavik when you’re traveling on a budget. Located in the heart of the city, it features a large balcony to admire the city from above. They often organize music and activities, have good wifi, and friendly staff.
Camping & Campgrounds Near Reykjavik
- Reykjavik Campsite – Located in the Laugardalur area of Reykjavik, this modern campground features a kitchenette, self-service laundry and bathroom facilities. It is wheelchair accessible. Bring a canine friend too because dogs are welcome! Parking and wireless internet is free.
- Hafnarfjörður Camping – Stay in Iceland on a budget inside Vídistaðatún, on grounds with lush lawns. Escape the bustle of the city for a quiet camping experience just half an hour away from Keflavik International Airport. This family-friendly campsite has modern amenities like a laundry machine. Internet access is available at the hostel located next door.
Where To Stay On The Golden Circle – Selfoss & Hveragerði
The Golden Circle is a circular 300km route that takes you from the capital city of Reykjavik towards the center of Iceland, and back again in a single day. It’s the perfect introduction to Iceland if you’re short on time or on a layover.
From ancient historical sites to beautiful natural landmarks, the Golden Circle has a bit of everything. You can join an organized tour of the Golden Circle or rent a car and self-drive at your own pace.
Most people base themselves from Reykjavik for this drive, however, you can also spend the night somewhere along the Golden Circle. The towns of Selfoss and Hveragerði are good options for this.
Here are my suggestions for the top hotels, hostels, and campgrounds on the Golden Circle depending on your budget.
Cheap Hostels On The Golden Circle
Selfoss Hostel – Everything you need to get a good night’s of sleep before you continue to explore Iceland. The clean, functional rooms have free wifi and a view over Ingolfsfjall mountain. There’s free parking, which is a big plus when you’re renting a car in Iceland. There’s a big common kitchen and a hot tub too.
Hot Springs Hostel – Splendid mountain views greet you when you look out of the window every morning. If you would like to relax within the hostel, there’s Wi-Fi, and you can also spend some time in the play area. However, the enchanting landscapes of Reykjafjall Mountain around the hostel invite you for a hiking expedition.
Budget Hotels On The Golden Circle
SKYR Guesthouse – This guesthouse has spacious rooms equipped with a television and a coffee/tea maker. Enjoy good coffee and a sumptuous meal on site as you plan whether to go hiking or to enjoy a shopping excursion at the market. There’s free wireless internet everywhere and free parking. If you don’t wish to drive, hire a bike at the guesthouse and explore the neighborhood.
Guesthouse Inga – The location of this guesthouse on the Golden Circle is excellent, with open skies bringing the beauty of the northern lights over the property. The rooms are spacious, neat, and some have great views of the scenic surroundings. The communal bathrooms are modern and clean. You’ll also love the communal lounge.
Mid-Range Hotels On The Golden Circle
Eldhestar – Located only half an hour from the capital, this Iceland eco-hotel provides everything you need to relax. You can have a cup of hot tea in the lounge next to the fireplace or enjoy a cocktail at the bar. Each room has a private entrance with nature-inspired décor. Eldhestar has an outdoor wooden hot tub and is located next to an Icelandic horse farm.
Guesthouse Bjarney – The rooms share a furnished kitchen, bathrooms and a laundry room. On the terrace, you can host a barbecue for your travel buddies or for the new friends you make while chatting at the communal lounge. To take the experience to another level, stay in the caravan instead of an ordinary room.
Luxury Hotels On The Golden Circle
Frost & Fire Hotel – This unique luxury hotel in Iceland is near a geothermal area, giving you the feeling of being in the middle of nature. Thingvellir National Park is only a 40-minute drive away. Relax at the spa-like facilities including two hot tubs, an outdoor pool, hot spring powered Jacuzzi and sauna. You can even cook an egg over a natural hot spring for breakfast!
Ion Adventure Hotel – View of the northern lights is a definite reason to stay at this hotel near Thingvellir National Park. The hotel sits on Mount Hengill and it has a restaurant, heated pool, spa and sauna. The communal lounge is where you share your stories as you meet other adventure-seekers.
Where To Stay On Iceland’s South Coast – Vik
Iceland’s South Coast is filled with natural wonders, making it perfect for an adventure outside the capital. If you’re driving around the entire Ring Road on Route 1, this is usually the next stop after a trip around the Golden Circle.
The South Coast is home to some of Iceland’s most famous waterfalls, like Seljalandfoss and Skogafoss. Reynisfjara Black Beach, Sólheimajökull Glacier, and the Eyjafjallajokull Volcano are other highlights.
One of the larger towns tourists stop at is called Vik [MAP], with many different lodging options, restaurants, and activities nearby. So it’s a great place to stay for a night or two.
Here are my suggestions for the top hotels, hostels, and campgrounds along Iceland’s South Coast depending on your budget.
Cheap Hostels On Iceland’s South Coast
Puffin Hostel – Located in the center of Vik, this hostel is only a 10-minute walk from the fabulous black beaches. It offers a fully equipped kitchen and a shared seating area. The functional rooms have shared facilities and bathrooms.
Budget Hotels On Iceland’s South Coast
Hotel Geirland – The rooms offer views of mountain ridges around the hotel. Some cabins are stand-alone units set on a pristine garden. The restaurant serves a la carte breakfast and dinner and it also pre-packs lunch on request ahead of expeditions. To catch up with family and friends online or to watch a television show, head to the hotel’s main building.
Guesthouse Reyir – This family-owned guesthouse is a short distance from the beach, and if you’re lucky, you’ll get a room with spectacular view of the sea. You share bathroom facilities with other guests, and the communal kitchen has everything you need to prepare a meal when you don’t want to dine outdoors.
Mid-Range Hotels On Iceland’s South Coast
The Barn – Located near Vik and provides a great base for exploring the South Coast of Iceland. It features parking and free wifi, being great for travelers who tour the island by rental car. The rooms offer enough privacy, which makes this hostel a great option for couples. Some of the rooms have a view over the mountains and there are dormitory beds with drapes available.
Icelandair Hotel Vík – This hotel is less than 5km from major attractions like Reynisfjall Mountain, Vikura River and Lake Höfðabrekkulón. Situated just opposite the beach, and near restaurants and other amenities, this hotel in Iceland is a perfect place to stay. It has various room options such as family, twin and triple rooms.
Luxury Hotels On Iceland’s South Coast
Hotel Kria – For a luxurious stay near Vik this new hotel opened in 2018. The rooms have a modern design and all the facilities one can expect from a high-class hotel. During your stay at Kria you can enjoy amazing mountain views, a cocktail at their bar or a delicious meal at their restaurant, which serves Icelandic specialties. The breakfast buffet features food from local farms.
Black Beach Suites – For unparalleled view of the mountain and the sea, just step into the terrace at this property on Iceland’s South Coast. You can prepare food in your room; there’s a fridge, a microwave and a toaster. The black sand beach is just 4km from this property, and fun activities in the vicinity are outdoor dining, skiing and golfing.
Where To Stay Near The Glacier Lagoon – Höfn
Continuing your drive, you’ll eventually reach the fishing village of Höfn. Höfn means “harbor” because it sits on one of the few natural harbors found in Iceland.
This is the next major town after Vik, about a 4-hour drive away. While four hours doesn’t seem like much, there’s so much to do in between these two Icelandic towns that you may want to spend a night here.
Hofn is the town closest to Jökulsárlón glacier lagoon and Vatnajokull National Park. Watching the sunrise from Jökulsárlón was one of the highlights of my trip, so you might want to sleep nearby.
Here are my suggestions for the top hotels, hostels, and campgrounds near Hofn and the glacier lagoon depending on your budget.
Cheap Hostels Around Höfn
Höfn Hostel – Living close to the harbor, with exceptional views of Vatnajökull Glacier, is one of the highlights of a stay at this hostel. Shared facilities include a television lounge and a bathroom. Hiking should top your list of adventures, and you could also play golf about 3km from the hostel. Parking is available, without prior reservation, and it’s free.
Lilja Guesthouse – This friendly guesthouse offers spacious rooms with a warm floor and private bathrooms. The quiet rooms are equipped with a coffee machine and free WiFi. The nearby mountains provide a great view for the guests, who can enjoy their coffee in the shared lounge.
Budget Hotels Around Hofn
Skyrhusid Guesthouse – How about a night right next to Jokulsarlon Glacier Lagoon? The view of the mountain is enchanting. The rooms at this farm-house style guesthouse have a wash basin and the bathroom is communal. There are two restaurants on the property. For history lovers, Thorbergssetur Historical Museum is on site.
Höfn Guesthouse – The shared dining area is the spot to meet fellow travelers. All rooms, whether in the main building or in the annex, have either a double or twin beds. Bathrooms are communal, and there’s free wifi. A lazy stroll to the harbor is perfect when you don’t want to visit Höfn Swimming Pool a short distance from the guesthouse.
Mid-Range Hotels Around Höfn
Hotel Hofn – Most rooms have views of the nearby glaciers and the sea. The hotel has private parking, a great bonus if you are traveling by rental car. You can dine on the restaurant’s terrace to admire the view as you enjoy Icelandic specialties. Jokulsarlon glacier lagoon is one hour away, while the Silfurnes Golf Club and Hofn Harbour are only a 10-minute walk.
Hotel Jökull – A short drive from Höfn, you arrive at this hotel for an unforgettable vacation with amazing views of the northern lights. Vatnajökull, the largest glacier you’ll see in this country ought to convince you to stay longer. Some rooms have a private bathroom while others share a bathroom. There’s free parking, and a bar.
Luxury Hotels Around Hofn
Aurora Cabins – If you’re lucky, you might catch the magnificent aurora borealis from the cabin porch at this awesome Iceland hotel. There’s a small hill nearby with a bench on top, another nice spot to admire the lights. The cabins are spacious and feature free wifi, a kitchen with microwave and toaster, terrace and a seating area. Great romantic place for couples!
Where To Stay In East Iceland – Egilsstaðir
East Iceland is often overlooked by tourists, being so far from the capital of Reykjavik. But it has a lot to offer. The picturesque fishing villages which line the rugged landscape are dotted with waterfalls and glaciers, making the area perfect for hiking.
The main city people base themselves in East Iceland is called Egilsstaðir, one of Iceland’s youngest towns. It was built on the banks of the Lagarfljot River in a wide valley. It has good access to the Eastern Fjords too.
East Iceland is also rich in legends about the elves and other mythical creatures which were believed to populate the area. It’s a good place for wildlife spotting, including herds of wild reindeer, arctic foxes, and puffins.
Here are my suggestions for the top hotels, hostels, and campgrounds near Egilsstaðir and the East Fjords depending on your budget.
Cheap Hostels In Egilsstaðir
Tehusid Hostel – The rooms at this hostel in Egilsstaðir feature comfortable beds and shared bathrooms. Other communal facilities are a furnished kitchen and a lounge. Wake up to breakfast at the hostel before you explore the rivers, mountain and lake in the vicinity. The Stafdalur Ski Lift is 20km from the hostel.
Budget Hotels In Egilsstaðir
Laufás Guest House – A night on a comfortable bed prepares you for the range of adventures nearby such as skiing, swimming and hiking. This family-friendly guesthouse has simple but modern rooms with a communal bathroom, a kitchen and a lounge. There’s a play area for kids, and you could also take children to the geothermal swimming pool a short walk from the property.
Mid-Range Hotels In Egilsstaðir
Icelandair Hotel Herad – This hotel’s plush lounge is probably where you will spend your evenings after exploring attractions like Hengifoss waterfall. There’s a terrace bar, a restaurant that serves delicious steak, WiFi in rooms and satellite TV. This hotel belongs to Icelandic Hotels. The detail in the interior décor and room furnishings is exceptional.
Luxury Hotels In Egilsstaðir
Hótel Valaskjálf – Lush, scenic lawns set the mood for a quiet stay at this hotel. The rooms have WiFi access; they are en-suite, spacious and clean. Enjoy buffet breakfast at the restaurant before you head outdoors to explore the forests and rivers. Fun activities in the vicinity include hiking and boat rides.
Where To Stay In North Iceland – Akureyri
Akureyri is the largest and most important town in Iceland, after its capital. It is an old trading city and important fishing hub, it’s also a wonderful base for whale watching trips. The city has heated swimming pools too.
Travelers to Iceland generally end up staying in the city of Akureyri, or near Lake Myvatn, depending on where you end up after a long drive on Route 1.
Lake Myvatn is located in an active volcano area and is surrounded by amazing lava formations. There is a rich population of water birds living around the lake, making it great for bird watching.
Here are my suggestions for the top hotels, hostels, and campgrounds around Akureyri depending on your budget.
Cheap Hostels In North Iceland
Town Square Guesthouse – At Town Square Guesthouse you will find all the essentials for a decent stay. Some rooms offer views over the sea or the mountains, while all of them include access to a shared bathroom and free WiFi. Guests also have access to a fully equipped shared kitchen and a nice terrace.
Budget Hotels In North Iceland
Lónsá Guesthouse – This guesthouse is a family-owned property so expect a homely touch everywhere. The terrace yields awe-inspiring views of the surrounding. With free WiFi, and a desk in each room, you have all you need while traveling as a digital nomad. Guests share a bathroom, a living room and a kitchen. Close to the guesthouse is Akureyri Swimming Pool and Dalvik Fishing Village.
Mid-Range Hotels In North Iceland
Icelandair Hotel Akureyri – This Iceland hotel in Akureyri offers modern rooms with wooden floors and comfortable beds. They have a cozy bar with a fireplace, and the restaurant cooks delicious meals with Icelandic and Mediterranean influences. The Akureyri swimming pool and geothermal hot tubs are only a 2-minute walk away from the hotel.
Luxury Hotels In North Iceland
Hotel Kjarnalundur – Just 2km away from Akureyri Airport and 5km from the city center. The panoramic views of the surroundings and the amazing Aurora Borealis can be enjoyed from all over the property. There is a hot tub on the deck of the cottage, which also provides a great spot to admire the scenic landscapes Cozy, modern design with wooden finishes. You also get free access to their sauna!
Where To Stay On Snæfellsnes Peninsula
Snæfellsnes Peninsula is nicknamed “miniature Iceland”, thanks to its vast diversity of landscapes. This also makes it perfect for a quick weekend getaway, during which you can enjoy the best of Iceland.
Driving around this peninsula you’ll find waterfalls, hot-spring pools, lava tubes, black sand beaches, old churches, fields of wildflowers in the spring, and massive glaciers.
Driving around Snæfellsnes is another day-trip option if you don’t have a lot of time in Iceland, as it’s located only 2 hours north of Reykjavik city.
Here are my suggestions for the top hotels, hostels, and campgrounds on Snæfellsnes Peninsula depending on your budget.
Cheap Hostels On Snæfellsnes
North Star Guesthouse – North Star Guesthouse offers spacious rooms and free private parking on the main street of Olafsvik. There is a self check in/check out which makes everything easier for the traveler who wants to get some rest before heading to the restaurants in the area for a drink and a meal. Popular activities for guests are golfing, hiking and fishing.
Budget Hotels On Snæfellsnes
West Park Guesthouse – The view of the mountain and the ocean will make you fall in love with this location. The guesthouse sits in Snæfellsjökull National Park, offering eight houses with sea and mountain views. Each house has a spacious kitchen and living room so you won’t feel caged when there are other guests sharing a house with you.
Mid-Range Hotels On Snæfellsnes
Arnarstapi Hotel – Located only 200m from the Gatklettur rocks and offers views over the sea, which makes it ideal when you just want to relax and enjoy nature after a long day. The rooms are modern and feature private bathrooms. This new hotel also has an on-site restaurant where you can enjoy some of the most delicious Icelandic specialties.
Luxury Hotels On Snæfellsnes
Fell Holiday Home – This place has 6 separate bedrooms with 2 bathrooms, a fully equipped kitchen and a living room. The apartment also has a garden, which makes a great place to admire the Northern Lights and the Gatklettur rocks. There is free WiFi all over the modern property.
Keflavik Airport Hotels & The Blue Lagoon
Budget Hotels Near Keflavik Airport
The Base Hostel At Keflavik Airport – Located near the airport, the hostel style units share a bathroom and a kitchen. Free WiFi is available, and there are shuttle services to and from the airport. If you have time before your flight, request the staff to organize a trip to the Blue Lagoon nearby.
Brimarsbrú Sleep Inn – If you love art as much as you love traveling, the collection in the sleeping area will grab your attention. This inn has a cozy homestay feeling with all the amenities you need away from home. Prepare your meals in the kitchen; you can even bake or microwave your meals. The nearest restaurant, Tjarnargrill, is less than a kilometer away.
Kef Guesthouse At Grænásvegur – This guesthouse’s location is excellent, just 4km from Keflavik International Airport. Accommodation options are units with communal bathrooms and others with private bathroom facilities. If you don’t want to dine out, there’s a furnished communal kitchen. The Blue Lagoon’s geothermal spa is about half an hour away.
Budget Hotels Near The Blue Lagoon
Geo Hótel Grindavík – This hotel checks you into a clean, spacious room with a relaxing ambiance. Each room has a TV and a private bathroom equipped with a hairdryer. There’s a communal lounge, free WiFi and parking at no charge. With the Blue Lagoon’s geothermal spa just 6km from the hotel, there’s something to do outdoors.
Luxury Hotels Near The Blue Lagoon
Northern Light Inn – This inn has spacious rooms with WiFi, a TV, and a hairdryer in the bathroom. Max’s Restaurant treats guests to enticing seafood and local cuisine on the buffet and a la carte set-up as they enjoy a panorama of the peninsula at the dining area. The Blue Lagoon is walking distance from the inn.
Renting A Campervan In Iceland
There are many ways to explore Iceland. Most people rent a car while staying in hotels, or book a campervan while sleeping in the vehicle. Convenience is one of the main reasons people choose to rent a campervan.
Renting a campervan in Iceland can save you a lot of time and money. You can prepare your own food on the go and save money on accommodation. It also gives you a lot of flexibility to change your plans anytime you want.
But life on the road might take its toll, especially if you have small kids. Not all campervans have a toilet and you might miss showering on a regular basis.
The weather depends on luck and what time of year you visit. A worst-case scenario is that you might have to cook in the rain, snow, or deal with high winds and cold temperatures.
After many trips to Iceland, I’ve both stayed in hotels as well as rented a campervan. I highly recommend Happy Campers if you decide to go that route!
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READ MORE ICELAND TRAVEL TIPS
I hope you enjoyed my guide to the best places to stay in Iceland! Hopefully you found it useful. Here are a few more wanderlust-inducing articles that I recommend you read next:
- Check out my ultimate Iceland Ring Road itinerary to learn about all the top highlights along the way.
- Planning a trip to Iceland, but not sure when to go? Here’s the best time to visit Iceland organized by seasons.
- If you only have a few days, a better option is to drive Iceland’s Golden Circle as a day trip instead.
- Organizing an Iceland road trip, but afraid of driving? Here’s everything you should know about driving in Iceland.
- Bookmark my favorite Iceland photography locations to get that perfect shot for Instagram!
- Did you know that many citizens of Iceland believe in elves? Here are some other strange facts about Iceland.
- Want to improve your photos? Read my best travel photography tips and guide to picking a travel camera.
Have any questions about where to stay in Iceland? Which hotels in Reykjavik have you stayed at? Drop me a message in the comments below!