Where to Stay in Iceland: 2021 Insider’s Guide

The Nordic island of Iceland that sits in the North Atlantic Ocean should be on every travellers must-visit list! Known as the “Land of Fire and Ice,” Iceland is where some of the absolute largest glaciers in Europe can be found. Okay, they’ve gotten the ice-covered. But what about the fire part of their nickname? Turns out that Iceland is also home to the world’s most active volcanoes! Who knew!

If you’re wondering where to stay in Iceland, as well as the best areas to stay in Iceland we have got you covered! As a sparsely populated country, Iceland has plenty of space and room to breath. That means that lodging in Iceland can be truly special! Hotels in Iceland are certainly unique— from farmhouses to schoolhouses to hostels sitting above bus stations, there is something for everyone in Iceland!

Something to keep in mind is that accommodation in Iceland can be sparse, and very spread out between settlements. If you’re not staying in the bigger cities, you might have to travel hours between settlements. That means that you definitely want to have an understanding of Iceland’s accommodation options and of where exactly you’re planning to stay! Yes, that means that deciding where to stay in Iceland can be a headache. We’re here to smooth a salve on your worries and help you figure out where to stay in Iceland. Pre-planning is the way to go, folks!

Let’s dive into the top places to stay in Iceland and what you should do and see while you’re there. Ready to rumble? Let’s go!

Quick Answers: Where is the Best Place to Stay in Iceland?

Table of Contents

  • Reykjavik – Overall Best Place to Stay in Iceland
  • Husavik – Best Place to Stay in Iceland For Families 
  • Laugarvatn – Where to Stay in Iceland  for Couples 
  • Akureyri – Coolest Place to Stay in Iceland
  • Reykjavik – Where to Stay in Iceland on a Budget
  • Hvolsvollur – One of the Most Unique Places to Stay in Iceland
  • Snaefellsbaer – Where to Stay in Iceland for Adventure 
  • Reykjanesbaer – Best Place to Stay in Iceland for Seeing the Northern Lights

Map of Where to Stay in Iceland

Map of Where to Stay in Iceland
1.Reykjavik, 2.Husavik, 3.Laugarvatn, 4.Akureyri, 5.Hvolsvollur, 6.Snaeffellsbaer, 7.Reykjanesbaer (locations in no particular order)

Reykjavik – Overall Best Place to Stay in Iceland

The capital of Iceland is Reykjavik, and is the most densely populated area in all of Iceland. Of course, that means that it’s the city that has the most hostels, hotels, Airbnbs and you’ll find some pretty awesome bed and breakfasts in Reykjavik as well. You can find everything from beautiful hotels that overlook the harbor to quaint Airbnbs with cozy kitchens.

Where to Stay in Reykjavik, Iceland

There is so much to do and see in Reykjavik too, from touring the towering cathedral of Hallgrimskirkja, to taking in a show at the Harpa Concert Hall. Then, of course, there’s all the curious museums to meander around, including the Arbaer Open Air Museum to the more risque Icelandic Phallological Museum. You really never know with Iceland…

If you’re looking to stay in Reykjavik, then you’ll want to stay in the heart of the capital in the popular Midborg neighborhood. You’ll keep your pulse on the city and get a real feel for the city’s vibe! Plus, you really don’t want to miss out on any of the action do you?

The Best Places to Stay in Reykjavik

In the small, compact downtown neighborhood of Midborg, you’ll get to discover some of the best shops, cafes, and restaurants Iceland has to offer. It’s the best place to stay for nightlife, as it’s the capital’s dedicated entertainment zone! While there are other great neighborhoods worthy of exploring, staying in Midborg ensures a lively stay! Some of Reykjavik’s best Airbnb’s are around here.

Best Hostel in Reykjavik – Galaxy Pod Hostel

Galaxy Pod Hostel sure does live up to its name! Designed to emulate actual space pods, these are no regular dorm bunk beds! They also have a self-service kitchen, a movie room, and a social lounge. Enjoy a trip to infinity and beyond in this hostel. Yes, you’re practically guaranteed a memorable experience in your own “pod.” Leave the days of dorm beds behind!

Best Airbnb in Reykjavik – Downtown Luxury Comfort Room

This private room in an apartment will certainly make you feel like you’re right at home. You’ll be just 600 meters away from the harbor, which has recently evolved into a hip restaurant scene. So, you will love walking along the waters, marvelling at the boats, and nibbling on some of Iceland’s most innovative dishes! Moreover, the hosts of this Airbnb allow full access to the kitchen and dining room. And free public parking across the street is an added perk.

Best Hotel in Reykjavik – Heida’s Home

Choosing to stay at a hotel in Reykjavik can mean spending quite a lot of dough. Avoid the buyers remorse and go with Heida’s Home. This downtown family-run guesthouse is positively delightful. Plus, you’ll be just a one minute walk away from the popular Laugavegur shopping street which is wonderful to walk around and window-shop.

Husavik – Best Place to Stay in Iceland For Families

As a very safe country that boasts exceptionally low-crime rates, Iceland is a great place to travel with the family. When looking for the best city to stay in Iceland with kids, we have to recommend Husavik— lovingly referred to as the whale watching capital of Europe! In fact, during the summer, there is usually a 100% chance of seeing a whale each day! Now that’s a statistic we can get behind… Nothing is worse than going whale watching with the kids and leaving with nothing but disappointment.

Where to Stay in Husavik, Iceland

Trust us, the whole family will be dazzled watching the humpback whales swim through the frigid waters of the Skjalfandi Bay. Also, you can always add a puffin-watching tour to your trip too. Those quirky little birds sure are entertaining!

Wondering what else your family will love when staying in Iceland’s whale capital of Husavik? There’s the Exploration Museum that focuses on space missions and the beautiful Lake Myvatn to explore and to walk around. Don’t worry, there are trails that will keep the whole family happy.

The Best Places to Stay in Husavik

As Husavik is a tiny settlement in Iceland, you definitely want to get your accommodation secured well in advance. There aren’t a ton of options out there! But we dug deep and found the best ones for you and your family.

Quiet Apartment, Husavik
source: Quiet Apartment (Airbnb)

Best Guesthouse in Husavik – Arbol Guesthouse

This historic house in the center of Husavik offers simple and clean rooms. However, you’ll love the nearby scenery! You’ll be situated just a short walk from the harbor, close to a wonderful spa. In fact, the Husavik Whale Museum is just 1,650 feet from the guesthouse. You won’t be complaining about sore feet when staying at the Arbol Guesthouse.

Best Airbnb in Husavik – Quiet Apartment

This two-bedroom and one bathroom apartment comes with a total of three beds. That means that sleeping four people is as easy as pie. In fact, there is a pull-out couch in the living room, which means sleeping an extra person or two is possible. Perfect for the big families out there! Expect a short walking distance to all local attractions. And enjoy whipping up family meals in the fully equipped kitchen!

Best Hotel in Husavik – Husavik Cape Hotel

Husavik Cape Hotel is a recently renovated 1950s hotel that overlooks the Skjalfandi Bay. Enjoy 24/7 free cookies and coffee and a complimentary, delicious breakfast buffet each morning. What keeps the kids happier than free cookies? Probably skip out on giving them the coffee though. Furthermore, we love the hiking trails that wind around the property. You and your family are sure to have a pleasant stay at this charming hotel.

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Laugarvatn – Where to Stay in Iceland  for Couples

As a positively tiny town, of only around 200 people, Laugarvatn drips charm. Situated in South Iceland, just about 56 miles from Reykjavik, Laugarvatn is actually very close to a lot of Iceland’s top sites such as the Gullfoss waterfall and Geysir.

What makes Laugarvatn where to stay in Iceland for couples is the romantic environment. Of course, there is plenty of privacy in this isolated settlement. However, it’s the natural surroundings that truly shine. Surrounded by hills, forests, fertile countryside, and even lava fields, Laugarvatn is a natural paradise. There is even a lake, Lake Laugarvatn, that is great for romantic strolls, geothermal dips, or fishing. That’s right! There is a spa at Lake Laugarvatn where you can relax in the rejuvenating geothermal baths right then and there. Talk about couples paradise…

When comparing this geothermal pool to the more popular Blue Lagoon, you’ll find that Laugarvatn’s Fontana Spa is smaller, more intimate, and much more affordable. You and your loved one will be swept off your feet, and plopped down into geothermal bliss, in Laugarvatn.

The Best Places To Stay in Laugarvatn

As we’ve already mentioned, Laugarvatn is a tiny settlement. That means that it is clearly the smart call to book in advance to secure your spot at your favorite Iceland accommodation listed below!

Best Hostel in Laugarvatn – Héradsskolinn Guesthouse

The Héradsskolinn Guesthouse is actually built into a 1920s school building and is one of Iceland’s iconic hostels. You’ll love the stylish, brightly decorated rooms. And the lake and mountain views are to die for! There also is a bistro, cafe, and bar located inside of the hotel itself, which makes everything oh-so-very convenient. You and your significant other are sure to remember your stay here at the memorable Héradsskolinn Guesthouse.

Best Airbnb in Laugarvatn – Two Bedroom Family Apartment

You and your loved one can enjoy this spacious apartment all to yourselves. While there are quite a few rooms to rent in Laugarvatn, soak up some privacy in this dreamy Airbnb. As an added bonus, you’re just a one minute walk to the rejuvenating waters of the Fontana Geothermal baths!

Best Hotel in Laugarvatn – Farmhotel Efstidalur

This hotel is set right onto a farm in the Golden Circle. Expect a very nice and unique stay on this farm! You’ll love the rustic, wooden cabins and the views of the cows out in the barn. When you’re not distracted by the cute cows, you’ll be dazzled by the views of the surrounding mountain! Our favorite part about the Farmhotel Efstidalur is that during the summer, this hotel offers horseback riding and traditional cooking classes! Talk about memorable!

Akureyri – Coolest Place to Stay in Iceland

Akureyri is a small city in Iceland that is filled with brightly painted wooden houses and plenty of cozy bars. Little known fun-fact, the stoplights are shaped like red hearts! How darling is that?

The population of Akureyri sits around 18,000, so it is larger than other settlements, but a bit smaller than the capital. Given it’s middle-size, it’s easy to explore on foot. You’ll definitely be charmed by the traditional houses on Hafnarstræti Street! Of course, a trip to Akureyri wouldn’t be complete without taking a dip in the Akureyri geothermal pools. We could sure use a dip in those relaxing waters ourselves right about now…

Where to Stay in Akureyri, Iceland

What we really adore about Akureyri, and what massively adds to it being the best city to stay in Iceland for the cool factor, is the opportunity to do some extreme sports! In the winter, you can take snowmobiling tours around the mountain, or you can even go skiing down Hlidarfjall. Don’t feel disappointed if you plan on visiting Akureyri in the summer, because then there is whale watching to look forward too! Definitely a bucket-list Iceland item, right there!

The Best Places to Stay in Akureyri

It’s hard to go wrong with the darling hotels in Iceland’s treasure-of-a-town Akureyri. Things are pretty tightly placed together too, so you won’t have to stress about being too far from where you want to be. You’ll pretty much always be right in the middle of the city! Very convenient for those of us who are bad with maps…

Best Hostel in Akureyri – Akureyri Backpackers

In this highly functional, and ever-so cozy backpacker hostel, you’re sure to enjoy a great atmosphere and budget-friendly rates. There is a small bar inside the hostel which encourages socialization and making friends fast. Also, there is a washer and dryer that guests can use for an additional charge.

Best Airbnb in Akureyri – Heart of Akureyri Room

This private room in a guesthouse is the perfect Airbnb right in the heart of the city. The room is cozy and comfortable, and situated so close to delicious bakeries and delicious restaurants. If you were hoping to cook a meal yourself, the guesthouse has a shared kitchen that guests are invited to use! If you’re feeling lazy, you can always just make some cereal…

Best Hotel in Akureyri – Hotel Kea

This 4-star hotel is located right in the heart of Akureyri. It has bright and airy rooms with traditional wooden floors. It’s a beautiful hotel that offers stunning views of the mountains in the distance. There is even a nearby spa and gym that will give guests of the Hotel Kea discounts.

Reykjavik – Where to Stay in Iceland on a Budget

If you’re looking for the best city to stay in Iceland for the overall health and happiness of your wallet, Reykjavik is the way to go. Let’s be real. Iceland is expensive. When wondering where should I stay in Iceland on a budget, yessiree, the answer is Reykjavik.

Where to Stay in Reykjavik, Iceland

Not only will you be close to the airport and to great public transportation options, but you’ll also have the cheapest choices for lodging in Iceland available to you. Plus, there are a lot of free things you can do in Reykjavik too! From doing a free walking tour of the city, to hiking Mount Esja, to visiting the beach of Nautholsvik. If you didn’t want to miss out on the geothermal pool action, don’t think that the pricey Blue Lagoon is the only option out there. You can visit free, or cheaper, hot springs around Reykjavik. The website Hotpot Iceland can provide more information on that for you!

The Best Places To Stay in Reykjavik

While Iceland isn’t exactly known for having lots of great budget options, staying in Reykjavik means you don’t have to break the bank. There are plentiful hostels and affordable accommodation options. Don’t worry, we chose the best of the best for you!

Best Hostel in Reykjavik – Bus Hostel Reykjavik

This budget-conscious hostel promises guests a low-key, no-frills environment. It actually is situated right about the Reykjavik Terminal bus station, which means that you can get dropped off straight from the airport to your hostels doors! Talk about a time and money saver! Plus, this hostel has some awesome amenities like an outdoor terrace with a BBQ and an onsite bar.

Best Airbnb in Reykjavik – Quiet Room in Actors Home

While there certainly are more fancy Airbnbs out there, this one is perfect for budget travelers. It’s for a one-bedroom rental inside an apartment with a shared bathroom. However, this central located Airbnb will save you lots of transportation woes and worries all while saving you some dough!

Best Hotel in Reykjavik – Brim Hotel

With free parking and a shared kitchen, Brim Hotel has taught of all the ways it can save guests some money, all while making them feel right at home. Plus, there is complimentary tea, coffee, and wifi! Located just 1,300 feet from the popular Laugavegur shopping street, you’ll be close to all you need.

first aid iconIceland is a very fun place and one could easily get carried away while visiting. It’s important to remember that no country is perfect though.

Read our safety guide for Iceland before planning your trip so you will be extra prepared when you arrive.

Hvolsvollur – One of the Most Unique Places to Stay in Iceland

Now let’s talk about tiny… Hvolsvollur is an absolutely teeny-tiny town located in South Iceland. It only has a population of 950 people! What makes staying in Hvolsvollur so unique is not just the sheer novelty of staying in such a tiny town, but also the number of wonderful hiking routes in the area. One of our favorite hike involves seeing the strange rock Drangurinn that sits by the farm Drangshlíð, which is under the towering Eyjafjöll mountains.

Hvolsvollur is also just a hop, skip, and a jump away from some of Iceland’s other beautiful sites such as one of Iceland’s oldest swimming geothermal pools, Seljavallalaug which is just 27 miles away. Plus, there are natural caves and lovely waterfalls just a quick drive away too!

So choosing to stay in the tiny town of Hvolsvollur will bring you even closer to your travel companions, and to some of Iceland’s most beautiful landmarks. Stay off the beaten path in Hvolsvollur, and cozy up with all that is, well, incredible!

The Best Places to Stay in Hvolsvollur

Surprise, surprise. Hvolsvollur is a tiny town with very few places to stay. Obviously you won’t find a Marriott or a Hilton in sight! That being said, these special accommodation options are where true memories are made. We love the unique factor and the charm!

Best Hostel in Hvolsvollur – Midgard Base Camp

Midgard Base Camp is more than just a hostel— it’s an experience! With everything from a rooftop hot tub and sauna, to views of the grazing horses and volcanoes, Midgard is where the magic happens. A shared kitchen is available, and laundry facilities are available for an additional fee.

Best Airbnb in Hvolsvollur – Villa on the South Coast with a Volcano View

This two-bedroom villa sits on the outskirts of Hvolsvollur near the volcano itself. From outside your kitchen window you can bask in the views of Hekla, the most active volcano in all of Europe! Plus, there is a hot tub where you can cozy up and watch the Northern Lights. Talk about special!

Best Hotel in Hvolsvollur – Hotel Hvolsvollur

Hotel Hvolsvollur sits in the ideal location, near the Seljalandsfoss Waterfall and the Helka Volcano. The rooms are nice and spacious, and the hotel is within walking distance of a restaurant and supermarket. Breakfast is included!

Snaefellsbaer – Where to Stay in Iceland for Adventure

Snaefellsbaer is a small town located in Western Iceland. It’s packed with incredible adventures waiting for you to get your adrenaline rush in! From visiting the Snaefellsbaer volcano to walking around the Snaefellsjokull National Park, to visiting the black-sand beach of Djupalonssandur complete with its own shipwreck, you sure won’t be bored in Snaefellsbaer.

Where to Stay in Snaefellsbaer, Iceland
source: Hartmut Albert (Shutterstock)

If you aren’t afraid of the dark,  or things that go bump in the night, consider taking a tour of Vatnshellir Cave and travel down into the East to explore an ancient lava tube!

Also, make sure to hike out to the Svodufoss waterfall on the Snaefellsnes Peninsula. It’s a fairly powerful 10m high waterfall that cascades down from a cliff of basalt columns.

The Best Places To Stay in Snaefellsbaer

Snaefellsbaer is a tiny municipality that has a population of just under 1,700. Accommodation is sparse, so make sure to book well in advance so you don’t throw a wrench in your adventure plans!

Best Hostel in Snaefellsbaer – The Freezer

The Freezer Hostel is actually an award-winning hostel that is known for its huge lounge and tiki-bar! With room for 22 people spread across four dorms, it’s a happy hostel that hosts regular programs and activities from karaoke to live music to pub quizzes! The Freezer is the perfect hostel for those who are looking for an adventure buddy or to team up with other people for hikes or adventures.

Best Rental in Snaefellsbaer – Gotuhus: Sea View Apartment

The Gotuhus Sea View Apartment sits just outside of Snaefellsbaer, technically in the tiny village of Hellissandur. Since, Snaefellsbaer is so tiny, sliding on over into the neighboring settlement is to be expected to find the best places to stay. This sea view apartment is set right on the beachfront. We love that it also features free bicycle rentals for guests!

Best Hotel in Snaefellsbaer – Gamla Rif

Gamla Rif is a guesthouse sitting in a 120-year-old farmhouse. It is simple, rustic, and charming. There is also a shared kitchen and lounge for guests to take advantage of. So, the best part of Gamla Rif is the large sun terrace that has great views of the harbor along the glacier!

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Reykjanesbaer – Best Place to Stay in Iceland for Seeing the Northern Lights

Reykjanesbaer is a municipality right on the Southern Peninsula of Iceland that includes the towns of towns Keflavík, Hafnir, and Njarðvík. Situated close to Reykjavik, Reykjanesbaer has great public transportation and has some awesome museums too! From the Icelandic Museum of Rock n’ Roll to the Viking World Museum, a visit to Iceland wouldn’t be complete without checking out Reykjanesbaer.

where to stay in iceland for the northern lights
Source: jennywonderland (Shutterstock)

Staying in Reykjanesbaer means you have easy access to seeing the Northern Lights if you rent a car. Keep in mind you’ll need to get away from the city lights and park and wait to see the infamous and oh-so-glorious Northern Lights! Just find a spot between Keflavik and the Blue Lagoon and just sit and wait. On the other hand, if you’d rather head someplace special, you can always drive up to the Thingvellir National Park and hope for a great show! Expect about a little more than a one hour drive.

The Best Places To Stay in Reykjanesbaer

Reykjanesbaer is a fairly big municipality in Iceland, relatively speaking. So accommodation is abundant. We selected the crème de la crème to ensure a pleasant stay for all you Northern Light hunters out there!

Best Hostel in Reykjanesbaer – Start Hostel

Start Hostel is a new airport hotel located close to the Keflavik airport. It’s a modern hostel that has spacious facilities that is known for comfort! You can expect a peaceful and quiet stay at this hostel. Perfect for stocking up on rest after staying up late at night looking at the glimmering Northern Lights.

Best Airbnb in Reykjanesbaer – Nice Apartment

Rent an entire apartment all to yourself in Reykjanesbaer. This two-bedroom apartment has a total of three beds, so sleeping four people is a breeze. Also, you’ll be just ten minutes from the Keflavik airport, and just a twenty minutes drive from the marvelous Blue Lagoon!

Best Hotel in Reykjanesbaer – Hotel Duus

Hotel Duus is a beautiful 3-star Iceland hotel that has a bar and a spacious terrace. At Hotel Duus, you get great value for your money! We love that it’s situated so close to the small harbor too so you can enjoy a nice stroll along the water. Also, you can’t beat a hotel that offers a free shuttle drop-off service to the airport.

Top Places to Stay in Iceland

Iceland is home to many beautiful places, as well as many cool spaces! We positively love the creativity that goes into crafting the Iceland accommodation scene. Backpackers to Iceland are not short of great options. There certainly is a lot of love and care that goes into renovating or constructing hotels, hostels, and Airbnbs— we’re happy to share our absolute favorites with you here.

The Top Places to Stay in Iceland

Best Hostel in Iceland – Galaxy Pod Hostel – Reykjavik

Oh what fabulous level of ingenuity went into building the intergalactic Galaxy Pod Hostel in Reykjavik. These space-pod dorm beds take the boring bunk beds of the past and take hostels far into the future!

Best Airbnb in Iceland – Villa on the South Coast with a Volcano View – Hvolsvollur

What is cooler than scrambling some eggs and toasting some bread while looking out the window and basking in the view of of the most active volcano in Europe? That’s right, this Airbnb is more than just a comfy villa— it’s a private viewing spot for Hekla the volcano. You surely won’t forget this Icelandic treasure of an Airbnb!

Best Hotel in Iceland – Farmhotel Efstidalur – Laugarvatn

The Farmhotel Efstidalur is where memories are made! With rustic, wooden cabins that offer serene pastoral views of farmlands, cows, and the surrounding mountains, you’re sure to feel right at home in this slice of Icelandic farm paradise.

Books to Read While Visiting Iceland

  • The Backpacker Bible – Get it for free! Learn how to ditch your desk and travel the world on just $10 a day whilst building a life of long-term travel with an online income. To inspire and help the next generation of Broke Backpackers, you can now grab ‘How to Travel the World on $10 a Day’ for free! Get your copy here.
  • Iceland: Land of the Sagas: Written by the awesome, Jon Krakauer  who circumnavigatedIceland in summer and winter, finding tales of monks and Vikings, outlaws and adventurers, trolls and witches. While touring and photographing, they discover the myths and legends of Iceland’s stirring history while having some incredible adventures!
  • Tales of Iceland: Running with the Huldufólk in the Permanent Daylight: This book is hilarious! A group of American students hitting the road to Iceland to find the “supermodels that work at mcdonalds”. Read about their hilarious adventure partying, getting lost, offending the locals and getting into ridiculous situations. This is a real life, real good read if you like dark humour like me.. you will literally be howling with laughter!
  • Iceland, Defrosted: Follow an Englishman’s adventure around Iceland. Less about wars over cod, flight-halting volcanoes and globe-shattering financiers. More about relaxing in natural hot pots, sharing barbecues in howling winter storms and eating waffles and rhubarb jam while watching playful Arctic foxes. Pretty much every backpackers ideal adventure…
  • The Sagas of the Icelanders: Want to get some Icelandic stories from the locals but struggle with the language? Well check this book out. A book of stories from locals in Iceland throughout the ages. Talking about the myths, culture, history and landscape of Iceland. A must read for the curious out there.

Final Thoughts on Where To Stay in Iceland

The “Land of Fire and Ice” sure is filled with wonders that far surpass the word “nice.” Iceland is brimming with natural wonders, from geothermal pools, to glaciers, to waterfalls that are sure to take even the most humdrum of travelers breaths away.

Where should I stay in Iceland

While staying in Reykjavik is perfect, especially for budget travelers, there are so many other beautiful spots in Iceland waiting for you to explore! From the adventures that await you in Snaefellsbaer, to the charming 1920s schoolhouse Héradsskolinn Guesthouse that is ready to welcome you in Laugarvatn, there are so many beautiful places to go and wondrous things to do in Iceland!

Do you own or run a kick-ass hostel? Want to be featured on this list? Get in touch at [email protected]

Don’t Forget Travel Insurance for Iceland

And don’t forget to take out Travel Insurance for your trip! I have been using World Nomads for some time now and made a few claims over the years. They’re easy to use, professional and relatively affordable. They may also let you buy or extend a policy once you’ve started your trip and are already abroad which is super handy.

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