Inexpensive flights and free stop-overs between the US and Europe have made Iceland a prime tourist destination in recent years. But towns in Iceland are few and far between, and budget travelers lured in by the low cost of flights may be surprised at the high cost of food and accommodation in Iceland. However, the popularity of the country means there are all types of Iceland lodging for those on a budget and especially those looking for a little bit of luxury. Figuring out where to stay in Iceland is much easier than you think once you know your options!
Overtourism in the peak seasons combined with small fishing villages means you should book far in advance if you’re looking for where to stay in Iceland other than Reykjavik, the capital city. There are lots of unique places to stay in Iceland near its diverse scenery, hot springs, waterfalls, beaches, glaciers, national parks, wildlife, and more. You don’t want to miss out! And if you are traveling on a budget, you will also be able to find cheaper Iceland accommodations closer to the big towns and cities.
Iceland is also a fantastic place to travel year-round. So if you’re looking for where to stay in Iceland in winter or where to stay in Iceland in the summer, it makes no difference. The best places in Iceland to stay are well equipped for all seasons.
This guide will answer the question, “where should I stay in Iceland?” for all types of travelers. It includes a list of the best towns and cities to stay in Iceland and the best accommodation in Iceland for all budgets and travel styles to help you plan the perfect trip. Check out the below guide for Iceland accommodation options. This where to stay in Iceland guide is perfect for your 2023 trips!
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Table of Contents
Reykjavik – Best Area to Stay in Iceland for First Timers
Reykjavik is Iceland’s capital and largest city. Most people who visit Iceland spend at least part of their trip here and it is the best location to stay in Iceland if it’s your first visit. For a capital city, Reykjavik is relatively small and most attractions, like the Harpa Concert Hall, are well within walking distance of the downtown area. For this reason, your budget will be the leading factor, rather than location, in choosing where to stay in Reykjavik Iceland.
Wondering where to stay in Iceland for a week? Reykjavik is a great base. It’s close to Iceland’s international airport and most day tours are based out of Reykjavik.
Laugavegur is the main street through Reykjavik, where you’ll find shopping, eating, and lodging. To be in the heart of everything, you’ll want to stay in one of the Reykjavik hotels close to Laugavegur. Be warned if you stay right on Laugavegur, you may hear partiers well into the wee hours. Slightly outside this area are East Town and West Town, each no more than 20 minutes walking from the city center.
Where to stay in Iceland Reykjavik
Luxury Hotels in Reykjavik:
Reykjavik Konsulat Hotel, Curio Collection By Hilton
Canopy by Hilton Reykjavik City Centre
Keflavik – Where To Stay in Iceland Near Blue Lagoon
The famous Blue Lagoon is Iceland’s most popular tourist attraction. It is a thermal spring heated by the local geothermal plant where you can swim outside in warm waters and try local spa treatments.
Keflavik, 50 km from Reykjavik on the Reykjanes Peninsula, is where the Blue Lagoon is located. While most visitors to Iceland will choose to stay in Reykjavik, Keflavik offers many hotel options as well for those wishing to be closer to the Blue Lagoon. The Blue Lagoon is just 20 km from Keflavik, offers on-site lodging, and is a must-visit thing to do in Iceland.
Where to Stay in Keflavik
Cheapest Hostels in Keflavik:
Luxury Hotels in Keflavik:
Diamond Suites Luxury Boutique Hotel
Selfoss and Hveragerði – Where To Stay in Iceland in the Golden Circle
The Golden Circle is a tour route of popular natural attractions just outside of Reykjavik. Spots usually include Thingvellir National Park, The Geysir Geothermal Area, Gullfoss Waterfall, and sometimes the Kerid Crater.
It’s a great idea for a day trip. But for travelers touring the Golden Circle and want to stay in the area to spend more time at each location, Selfoss and Hveragerði are good locations for an overnight stop. Or they’re perfect if you want an extended stay to explore the southern area of Iceland.
These small towns, just 40-50 km from Reykjavik, offer plenty of overnight options. Most are usually less expensive than Reykjavik and have a good assortment of dining options as well.
Where to Stay in Selfoss and Hveragerði
Höfn – Where To Stay in Iceland Near the Glacier Lagoon
Höfn is a fishing town along the southeast coast of Iceland. It’s the nearest large town with overnight accommodation close to Iceland’s largest glacier, Vatnajökull, as well as the Jokulsarlon Glacier Lagoon and Skaftafell National Park.
You may be able to find lodging closer to these destinations, but Höfn is a good central location for exploring this region for a couple of days or more. This is also a great spot for glacier hiking which is a popular activity in Iceland as it isn’t possible in warmer countries. You can go glacier hiking year-round, but summer and autumn are the best times due to them having longer days. So if you’re looking for where to stay in Iceland in October, September, August, or July then consider Höfn.
Where to Stay in Höfn
Egilsstaðir – Best Place to Stay in Iceland for Nature Lovers
If you are touring the East Fjords, one of the more remote spots in Iceland, Egilsstaðir is the main town where you will find accommodation in this region. Egilsstaðir actually sits inland on a river and is close to Iceland’s largest forest (The forest of Hallormsstaður) with access to several major fjords.
While Egilsstaðir is a small village with under 3,000 residents, visitors to the East Fjords will find a small range of hotel and hostel options for an overnight stay. The small population and abundance of nature here make Egilsstaðir a great place for wildlife spotting as well.
Where to Stay in Egilsstaðir
Cheapest Hostels in Egilsstaðir:
Tehúsið – Café, Bar, Guesthouse & Hostel
Akureyri – Where To Stay in Iceland Ring Road North
Akureyri is one of Iceland’s largest cities in north Iceland. This town of 20,000 residents is right on Iceland’s Ring Road so it makes for a great stopping place. In addition to the natural beauty found all over Iceland, visitors to Akureyri will find museums, churches, botanical gardens, and of course, many hotels and restaurants.
Driving the Ring Road is not recommended in winter (for tourists, at least!). So if you’re looking for where to stay in Iceland in September, Akureyri and other larger towns on the Ring Road are ideal.
Where to Stay in Akureyri
Hvolsvollur – Where To Stay in Iceland Ring Road South
Driving along the Iceland Ring Road takes around 10-14 days if you want to have time to actually stop, take part in activities, and do a few detours. So, you will need to stop in a fair few towns along the way! Some of those will be larger towns with lots of hotels, but some of those will be a little off-the-beaten-path like Hvolsvollur.
It’s mostly a residential town but there are a few accommodation options like campsites and hotels; Iceland might seem remote but you’re never too far away from another hotel. Hvolsvollur is only 100 km east of Reykjavik so it’s the perfect place to stop on your way in or out of the city.
Where to Stay in Hvolsvollur
Budget Hotels in Hvolsvollur
Self Contained Apartments in Hvolsvollur
Snæfellsnes Peninsula – Where To Stay in Iceland for Adventure
The Snæfellsnes Peninsula is just 90km long and contains some of Iceland’s most spectacular scenery. This is a detour from the Iceland Ring Road and is often overlooked by visitors to Iceland.
But those wishing to venture into the peninsula will be rewarded with scenery, waterfalls, and many small villages from which to choose an overnight stay. There are no large cities on the peninsula, but you’ll still find a few accommodation options in towns like Helnar, Olavsvik, and Rif.
Where to Stay on Snæfellsnes Peninsula
Budget Hotels in Snæfellsnes Peninsula:
Luxury Hotels in Snæfellsnes Peninsula:
Apotek Hotel by Keahotels
Vik – Where To Stay In Iceland for Northern Lights
When the timing is right, the Northern Lights can be seen from all over Iceland, even in Reykjavik! You could also be unlucky and not see them at all during your stay in Iceland in the dead of winter. That said, those wanting to know where to stay in Iceland in November, December, and the other darker months to see the Northern Lights should choose Vik. It’s a town on the southern coast of Iceland around 180 km from Reykjavik that isn’t huge but still has a few amenities.
The black sand beaches of Vik make for a cool foreground in your Northern Lights photography. Just make sure to not go on the black sand beaches at night because it’s no joke; tourists have been swept overboard by the rough tides. If you are unsure, there are plenty of Northern Lights tour guides and organized trips all over Iceland you can join.
Where to Stay in Vik
Husavik – Where To Stay in Iceland at Christmas
At least once, you should spend Christmas in one of the Nordic countries so you can experience what an authentic white Christmas should look like. And while any town in Iceland will be able to offer you a snowy winter wonderland, if you’re looking for where to stay in Iceland in December, you should choose Husavik.
It’s a large fishing town on Iceland’s north coast and the locals really dress it up for the festive season. There’s a gorgeous wooden church, which is the town’s biggest landmark, if you want to attend a service to sing some carols. Or, listen to some carols sung in Icelandic! Plus, there are cafes and bakeries where you can tuck into festive pastries too.
Where to Stay in Husavik
Cheapest Backpacking Hostels in Husavik
Húsavík Green Hostel
Affordable Luxury Hotels in Husavik
Laugarvatn – Where To Stay in Iceland for Couples
Laugarvatn is a tiny village (only 200 permanent residents!) close to Iceland’s Golden Circle Route. There’s not much there, only a few accommodation options and a supermarket, but it is perfect for couples who are seeking serenity and solitude for a romantic couples’ break.
One attraction that Laugarvatn is a picturesque swimming pool with a geothermal spa on the edge of a lake. Very few tourists know it exists so there are never any crowds and, if you’re lucky, you may get it all to yourselves!
Where to Stay in Laugarvatn
Cheapest Backpacking Hostels in Laugarvatn
Reykjanesbaer – Where To Stay Outside of Reykjavik/Keflavik international airport
Many tourists think that Reykjavik Airport is Iceland’s main international airport, but it isn’t. Reykjavik does have an airport but it doesn’t cater to international flights. Iceland’s international airport is actually Keflavik International Airport, around 50 km west of Reykjavik.
There are plenty of airport transfers you can book direct with your hotel no matter where you are staying in Iceland. But if you have a particularly early flight from Iceland or a late flight into Iceland, you might want to stay a bit closer. Reykjanesbaer is perfect because it is literally next door to Keflavik Airport. There are even things to do here like museums, restaurants, and bakeries.
Where to Stay in Reykjanesbaer
Cheapest Backpacking Hostels in Reykjanesbaer
Added Extra: Areas To Avoid in Iceland
Iceland is an incredibly safe country so there isn’t anywhere you should avoid due to crime. The only places you should avoid in Iceland are areas that don’t have a lot of scenery or activities. With so much to see and do in a place like Iceland, it would be such a waste to accidentally stay somewhere boring!
There isn’t much to see in villages like Húnavatnshreppur between Snæfellsnes Peninsula and Akureyri. And if you’re driving Iceland Ring Road, you might want to plan less time between Fossholl and Hofteigur in the northeast and more time on the south and west coasts. Again, they’re not bad places to visit. But when you’ve got a limited time to see the best of what Iceland can offer, you need to choose where you stay wisely.
I hope this guide has been helpful and has shown you the best places to stay in Iceland.
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