Inexpensive flights and free stop-overs between the US and Europe have made Iceland a prime tourist destination in recent years. Iceland towns 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 lodging in Iceland. However, if you look hard enough, you will find accommodation for almost any budget and to help you out, we’ve compiled this list of tips on where to stay in Iceland.

The combination of an exploding tourist industry within very small villages means you definitely need to plan ahead, as many towns can book up quickly, especially during the high season. There are no shortage of unique places to stay in Iceland due to its diverse scenery.

We will cover off all types of Iceland accommodation options from Hostels to luxury Iceland hotels as well as how to decide where to stay in Iceland, the best Iceland hotels, best places in Iceland to visit, the best places to stay in Iceland, hotels near Iceland attractions, Iceland neighborhood guide and many more. Airbnb is also a great option for short or long stays.

This post contains some affiliate links for your convenience.  Click here to read my full disclosure policy.

Urban Adventurers Looking for Nightlife

Reykjavik – Best places to stay Iceland

Reykjavik is Iceland’s capital and largest city, and is most likely where you will begin and end your Iceland vacation and is best location to stay in Iceland. For a capital city, Reykjavik is relatively small and most attractions 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.

Laugavegur is main street through Reykjavik, where you’ll find shopping, eating and lodging. To be in the heart of everything, you’ll want to stay 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, below is a list of Reykjavik hotels.

Where to stay in Iceland Reykjavik

Cheapest Hostels in Reykjavik:
Loft HI Hostel
Reykjavik Downtown HI Hostel
Kex Hostel

Budget Hotels in Reykjavik: 
Metropolitan Hotel
Hotel Cabin
Hotel Vik Arctic Comfort

Mid-Range Hotels in Reykjavik:
CenterHotel Thingholt
Centerhotel Arnarhvoll
Radisson Blu 1919 Hotel, Reykjavik
CenterHotel Skjaldbreid

Family Friendly Hotels in Reykjavik:
CenterHotel Klopp
Kvosin Downtown Hotel
Reykjavik Residence Hotel
CenterHotel Plaza

Luxury Hotels in Reykjavik: 
101 hotel
Reykjavik Konsulat Hotel, Curio Collection By Hilton
Canopy by Hilton Reykjavik City Centre
41 – A Townhouse Hotel

Business Travelers or Short Stopovers

Keflavik – Best place to stay Iceland for the famous Blue Lagoon

Keflavik, 50 km from Reykjavik, on the Reykjanes peninsula, is where Iceland’s international airport 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 close to the airport. The popular Blue Lagoon as also just 20 km from Keflavik, offers on-site lodging and is on most visitor’s Iceland bucket list. If you have a late arrival or early departure, staying in Keflavik might be the right choice for your itinerary.

Where to Stay in Keflavik

Cheapest Hostels in Keflavik:
Guesthouse Keflavik
Fit Hostel

Budget Hotels in Keflavik: 
CB Bed & Breakfast
B&B Guesthouse
Nordic Guest House

Mid-Range Hotels in Keflavik:
Hotel Keflavik
Nupan Deluxe
Hotel Berg

Family Friendly Hotels in Keflavik:
Hotel Keilir
Hotel Jazz

Luxury Hotels in Keflavik: 
Diamond Suites

Golden Circle Travelers

Selfoss and Hveragerði – Where to stay in Iceland around the Golden Cirlce

For those travelers touring the Golden Circle drive, and prefer not to return back to Reykjavik at the end of the day or take a day trip, Selfoss and Hveragerði are good locations for an overnight stop, or an extended stay to explore the southern area of Iceland. These small towns, just 40-50km from Reykjavik, offer plenty of overnight options, usually a bit less expensive than Reykjavik and have a good assortment of dining options as well.

Where to Stay in Selfoss and Hveragerði

Cheapest Hostels in Selfoss and Hveragerði:
Au44 Hostel
Hot Springs Hostel

Budget Hotels in Selfoss and Hveragerði: 
Annalyn Guesthouse
Guesthouse Menam
SKYR Guesthouse

Mid-Range Hotels in Selfoss and Hveragerði:
Thoristun Apartments
Guesthouse Bjarney
Hotel Ork
Reykjadalur Guesthouse

Family Friendly Hotels in Selfoss and Hveragerði:
Guesthouse Nordheimar
Guesthouse Frumskogar
Icelands Guesthouse

Affordable Luxury Hotels in Selfoss and Hveragerði:
Hotel Ranga (best places to stay in Iceland for northern lights)

Hikers wanting to explore Skaftatell National Park and Jokulsarlon Glacier Lagoon

Höfn – Where to stay in Iceland near the Glacier Lagoon

Höfn is a fishing town along the Southeast coast of Iceland, and is the nearest sizable town to find overnight accommodation close to Iceland’s largest glacier, Vatnajökull, as well as the Jokulsarlon Glacier Lagoon and Skaftatell 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 fairly popular in Iceland due to all the glaciers.

Where to Stay in Höfn

Cheapest Hostels in Höfn
Hofn Hostel
Hotel Edda Hofn

Budget Hotels in Höfn: 
Hofn Guesthouse

Mid-Range Hotels in Höfn:
Hofn Inn
Arnanes Country Hotel

Family Friendly Hotels in Höfn:
Hotel Jokull
Fosshotel Vatnajokull

Nature Lovers wanting to explore the East Fjords

Egilsstaðir – Where 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, 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:
Tehusid Hostel

Budget Hotels in Egilsstaðir: 
Laufas Guesthouse
Eyjolfsstadir Guesthouse

Mid-Range Hotels in Egilsstaðir:
Icelandair Hotel Herad
Hotel Edda – Egilsstadir

Family Friendly Hotels in Egilsstaðir:
Gistihusid – Lake Hotel Egilsstadir
Skipalaekur Iceland

Ring Road Travelers Looking for Urban Amenities

Akureyri – Where to stay in North Iceland

Akureyri is Iceland’s second largest city, and is located in north Iceland. This town of 20,000 residents makes for a great stop along Iceland’s Ring Road. 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.

Where to Stay in Akureyri

Cheapest Hostels in Akureyri:
Akureyri Hostel HI
Hafnarstraeti Hostel

Budget Hotels in Akureyri:
Lonsa Guesthouse
Akurinn
Akureyri Guesthouse

Mid-Range Hotels in Akureyri:
Hotel Nordurland by Keahotels
Lava Apartments
Hotel Ibudir
Torg Guesthouse

Family Friendly Hotels in Akureyri:
Hotel Kea by Keahotels
Our Guesthouse
Saeluhus Hotel Akureyri

Scenery seekers who don’t have time for the Ring Road

Snæfellsnes Peninsula

The Snæfellsnes peninsula is just 90km long, and contains some of Iceland’s most spectacular scenery. This is a detour from the Ring Road, and often overlooked by visitors to Iceland, but those wishing to venture into the peninsula will be rewarded with scenery and many small villages from which to choose an overnight stay. There are no large towns in the pensinsula, but towns like Helnar, Olavsvik and Rif have a few options.

Where to Stay on Snæfellsnes Peninsula

Cheapest Hostels in Snæfellsnes Peninsula:
Hostel B47
Bus Hostel
Kex Hostel

Budget Hotels in Snæfellsnes Peninsula:
Metropolitan Hotel
Hotel Cabin
Blue Arctic Hotel Sudurgata

Mid-Range Hotels in Snæfellsnes Peninsula:
Centerhotel Midgardur
Alda Hotel Reykjavik
CenterHotel Thingholt

Family Friendly Hotels in Snæfellsnes Peninsula:
CenterHotel Klopp
Kvosin Downtown Hotel
Storm Hotel by Keahotels

Luxury Hotels in Snæfellsnes Peninsula:
Sandhotel
Apotek Hotel by Keahotels

Northern Lights Seekers

Vik – Where to stay in Iceland to see the 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 in all of Iceland. That said, those wishing to see the Northern Lights will probably visit several spots in Iceland, but Vik, 180km from Reykjavik, is a good option for those wishing to get out of the “big city,” but are still looking for an assortment of amenities. The black sand beaches of Vik make for a cool foreground in your Northern Lights photography, just make sure to not get too close to the ocean as it can be extremely rough. Vik is one of the best towns to stay in Iceland.

Where to Stay in Vik

Mid-Range Hotel in Vik:
Hotel Edda Vik
Guesthouse Vellir
Einarsstadir Homestay

If you’d like to save it for later, please save it to Pinterest.

SaveSaveSaveSave

SaveSave

SaveSave