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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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

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

Budget Hotels in Reykjavik: 
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

Self contained apartment/rentals in Reykjavik: 
Apartment 1
Apartment 2
Apartment 3
Apartment 4
Apartment 5
Apartment 6

 

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:
Guesthouse Keflavik

Budget Hotels in Keflavik: 
B&B Guesthouse
A. Bernhard Bed and Breakfast
Nupan Deluxe
Blue Viking Guesthouse

Mid-Range Hotels in Keflavik:
Hotel Keflavik
Hotel Berg
Hotel Duus

Family Friendly Hotels in Keflavik:
Hotel Keilir by Reykjavik Keflavik Airport
Hotel Jazz
Sea View Apartment
Little white castle

Luxury Hotels in Keflavik: 
Diamond Suites Luxury Boutique Hotel

Self contained apartment/rentals in Keflavik: 
Apartment 1
Apartment 2

 

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

Cheapest Hostels in Selfoss and Hveragerði:
Au44 Hostel
Selfoss Hostel

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

Family Friendly Hotels in Selfoss and Hveragerði:
Guesthouse Nordheimar
Hotel South Coast

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

Self contained apartment/rentals in Selfoss and Hveragerði:
Apartment 1
Apartment 2
Apartment 3

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

Cheapest Hostels in Höfn
Hofn Hostel
Hotel Edda Hofn

Budget Hotels in Höfn: 
Hofn Guesthouse
Guesthouse Hvammur
Old Airline Guesthouse

Mid-Range Hotels in Höfn:
Hofn Inn
Arnanes Country Hotel
Apotek Guesthouse
Milk Factory

Family Friendly Hotels in Höfn:
Hotel Jokull
Fosshotel Vatnajokull
Díma Studio Apartments
Hotel Mikael

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 Hostel

Budget Hotels in Egilsstaðir: 
Eyjolfsstadir Guesthouse
Lyngás Guesthouse
Birta Guesthouse
Arctic East Apartment Egilsstaðir

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

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

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

Cheapest Hostels in Akureyri:
Akureyri Hostel HI
Hafnarstraeti Hostel

Budget Hotels in Akureyri:
K16Apartments
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

Self contained apartment/rentals in Akureyri:
Apartment 1
Apartment 2
Apartment 3
Apartment 4
Apartment 5

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
Borg Apartments

Mid range Hotels in Hvolsvollur
Hótel Hvolsvöllur
Midgard Base Camp & Restaurant
Gistiheimilið Spói
Hotel Selja

Family Friendly Hotels in Hvolsvollur
Guesthouse Vestri-Garðsauki
Summer house – Fíflholt
Brú Guesthouse
Fíflholt

Self Contained Apartments in Hvolsvollur
Apartment 1

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

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

Budget Hotels in Snæfellsnes Peninsula:
Hotel Cabin

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:
Apotek Hotel by Keahotels

Self contained apartment/rentals in Snæfellsnes Peninsula:
Apartment 1
Apartment 2
Apartment 3

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 Iceland

Cheapest Backpacking Hostels in Vik
Vík HI Hostel
The Barn

Budget Hotels in Vik
Guesthouse Carina
Puffin Hotel Vík
Dream guesthouse Vik
Arsalir Guesthouse

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

Family Friendly Hotels in Vik
Hótel Kría
Kósý Vík
Black Beach Suites
Hotel Katla by Keahotels

Affordable Luxury Hotels in Vik
Vík Apartments
Vík Cottages
Hótel Vík

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

Budget Hotels in Husavik
Höfði guesthouse
Skógar Sunset Guesthouse

Mid range Hotels in Husavik
Árból Guesthouse
Fosshotel Húsavík
Laugarholt Apartment

Family Friendly Hotels in Husavik
Post-Plaza Guesthouse
Húsavík Cape Hotel
Askja Apartment
Sólheimar Apartment

Affordable Luxury Hotels in Husavik
Skjálfandi Apartments

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
Hótel Laugarvatn

Budget Hotels in Laugarvatn
Háholt
Bjork Guesthouse
Farmhotel Efstidalur

Mid range Hotels in Laugarvatn
Galleri Laugarvatn
Héraðsskólinn Historic Guesthouse

Family Friendly Hotels in Laugarvatn
Gistiheimilið Björk
Middalskot Cottages
Eyvindartunga farm cottage

Self Contained Apartments in Laugarvatn
Apartment 1
Apartment 2

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
Start Hostel

Budget Hotels in Reykjanesbaer
Kef Guesthouse
Hotel Grásteinn

Mid range Hotels in Reykjanesbaer
Nupan Deluxe
Ace Guesthouse
Bank Guesthouse

Family Friendly Hotels in Reykjanesbaer
Bergás Guesthouse
Hótel Ásbrú by Keflavík airport

Affordable Luxury Hotels in Reykjanesbaer
Diamond Suites Luxury Boutique Hotel
Konvin Hotel – Keflavik Airport

Self Contained Apartments in Reykjanesbaer
Apartment 1
Apartment 2

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.

FAQs for Where to stay in Iceland

What part of Iceland is best to stay?

Personally I think Reykjavik is the best part to stay in Iceland because its somewhat close to the airport and a lot of day trips leave from here. It’s also the best place for people with different budget levels because there are a lot more accommodation options in Reykjavik.

Which part of Iceland is most beautiful?

There is no right answer, ALL of Iceland is incredibility beautiful, it’s almost like stepping into a different world. You can go from hot springs to snowy mountains to black sand beaches and then check out the northern lights in the evening (during winter).

Is 3 days enough to visit Iceland?

You can fully immerse yourself in Icelandic culture and landscape in three to four days. Even though you may not be able to see the entire island in three or four days, you might want to make several excursions from the capital. I’d recommend at least a week in Iceland, to be able to see everything but can it can be quite expensive, 3 days is more than enough. Some people can even get away with visiting Iceland for 2 days.

Where can I base myself in Iceland?

As mentioned about, Reykjavik is a great place to base yourself for a trip to Iceland. Reykjavik is the place that a lot of day trip depart from and it’s a place that fits a lot of budgets accommodation wise as its the biggest city in Iceland. 

How to stay in Iceland for cheap

Iceland offer a number of cheap hostels to stay in, otherwise you can hire a camper van or hire a car and head to campsites.

How expensive to stay in Iceland

Iceland is generally fairly expensive to visit and hence why most people only visit for 2-4 days.  Iceland is in fact the 5th most expensive country in the world. Keep an eye out for travel specials or look to stay in budget or hostel accommodation.

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