Best Hostels in Iceland for Backpackers (2023 Update)

If all hostels in the world would be like these best ones in Iceland that I am recommending today, we’d have some really happy backpackers and backpacking itself would be a lot more popular.

Sure, some hostels in Iceland cost as much as 5-star hotels in other parts of the world, but you do get what you’re paying for: quality, comfort and usually some amazing views too.

And fortunately, it doesn’t have to cost a fortune to stay in an amazing hostel in Iceland.

I’ve checked out my fair share over the years and today I am here to tell you which are my favorite hostels in Iceland. I am sure you will love them too!

They are all truly unique and offer a lot in terms of room quality, surroundings and the general vibe in the hotel.

They are perfect for exploring the country, making new lifelong friends and extremely well suited for digital nomads.

Héraðsskólinn Hostel – Top Pick

If the original characters scare you a bit, we can call it the Héradsskólinn Hostel or the Héradsskólinn Historic Guesthouse. Nobody will mind because, well, that’s the name of the town it is located in.

Designed by the country’s favorite architect Guðjón Samúelsson, this hostel is your one-stop destination to see the Northern Lights. It’s location, location, location with this one. 

Although, truth be told, it has some other aces up its sleeve too, as you can see below:

Heradsskolinn Historic Guesthouse

Located in a rural building on the banks of Laugarvatn Lake, this hostel used to be a school/ educational center up until the 90’s. It remained forgotten for almost two decades until they reopened it as a hostel.

The original design was preserved but the Héraðsskólinn has all the modern amenities you need.

You can choose from shared accommodation in rooms of up to 14 to private accommodation, which is perfect for families. Room sizes vary from decent to tiny, but they’re all in perfect condition.


Your linen, towels, Wi-Fi, and parking are included, making it an easy place to stay during an out-of-city trip to see the Northern Lights.

The kitchen and lounge facilities are homey and always neat. Breakfast is not included but you can purchase it for an additional (very reasonable) fee.

Finally, the best thing about the hostel – they wake everyone up when the Aurora borealis is on. No chance of sleeping through the show!

Check prices for your dates here.

The Freezer – Best for Art & Mingling

the freezer hostel iceland

It does not get any more cool hostel than ‘The Freezer’ in the west of Iceland. This award-winning social hostel would top any ‘most funky place to stay’ competition if it were up to me.

They always have something going on – from musicals, to stand up comedy, to movie nights with indie masterpieces on their huge cinema widescreen. Things are always different, obviously, but always fun.

Here is a peek into what they had in store for their guests during the summer of 2017 when I last visited:

  • A musical based on Jules Verne’s classic ‘Journey to the Center of the Earth’, which apparently attracted audience from all over the province
  • Improv nights with local stand-up comedians. In English!
  • Purgatorio, a formidable work of drama penned by Chilean playwright and human rights advocate, Ariel Dorfman and brought to life by Australian performers. Yes, they went cross-continental on this one and it was a huge sensation!

If you are wondering if these performances happen in the lobby while random guests sip their drinks… Well, they don’t.

There are actually two theaters in the building, as well as a lounge bar (but no performances at the bar). The Freezer is truly a cultural space and a center for the arts.

But maybe performance art is not your thing. Not an issue, there is also an active book exchange going on at all times and plenty of board games if you are not a big reader, either.

And since you are in Iceland for the natural wonders, The Freezer is just 10 minutes away from the Snaefallesjokull National Park.

Spend the day hiking, come back for mulled wine and some live music/ comedy/ a dark and deep movie about the meaning of life. You never know what you will land on at The Freezer!

Click here to check prices for your dates.

Sjávarborg – Best Value

sjavarborg hostel

You are literally on the harbor of the town Stykkishólmur and you will hear the fisherman chant and feel the breeze (more like freezing cold winds) every morning.

On that last note, all visitors are provided with warm snuggly blankets so you are less likely to take pneumonia back from your Iceland adventure.

If the warmth of the hostel grounds is not enough, there is an awesome geothermal pool just a couple of minutes away.

The Stykkishólmur swimming pools (yes, there are two – an indoor and an outdoor one and they are both hot ) has Fresenius certified water, claimed to have regenerative powers.

It’s a locals’ favorite as much as a tourist magnet and it has the decent price (plus water slides) to keep you entertained and happy.

But how about the actual hostel? Well, for one it is a very historic place. It started out as a basement space for ice that was delivered to the harbor. Fishermen would lay their catch here for sale and storage.

In 1938 they erected two floors above the initial basement and an actual shop was opened (where the owners would live upstairs and welcome clients downstairs).

The house was nicknamed Sjávarborg, meaning the Palace by the Sea and it has housed a bookstore, a barber shop and a grocery store to name a few.

The current owners bought the space in 2012 and by the summer of 2013, a hostel appeared.

Today, Sjavarborg is one of the most beautiful accommodation options in all of Iceland and a very cosy and comfortable one, too.

All rooms come with a view of the Stykkishólmur harbor and Breiðafjörður. Linen and Wi-Fi are included and so are the earplugs, in case one of your roommates is a snore-er. You are within walking distance to all of the town’s cool restaurants. 

Narfeyrarstofa and Sjávarpakkhúsið are two establishments that you absolutely cannot miss. Yum, Icelandic food!

Click here to check prices for your dates.

Galaxy Pod Hostel At Reykjavik – Most Unique

Located in downtown Reykjavik, this is the country’s very first pod hostel. What the capsules lack in space (that is the entire point of a pod hostel) they more than make up for in the design.

It is called Galaxy for a reason. Expect bright neon lights, pods that look like they belong on a spaceship, and an overall sci-fi aesthetic.

You don’t get a lot inside the pods, though, and you might want to think twice about staying here if you suffer from claustrophobia.

Each space is just two by one-meters in size and does not offer much more than the ridiculously comfortable bed and a reading light (plus curtains for privacy, of course).

There are smaller dorms, as well as a female-only dorm and they all have in-room lockers. Safety is not something you need to worry about anyway. Iceland is one of the world’s safest countries, to begin with.

You have a self-service kitchen at your disposition but there is no breakfast included on-site.

The snack bar in the lobby is a cool place to spend the night sipping beer with fellow travelers but for actual meals head over to the restaurant area.

It’s less than 15-minutes away by foot and you have plenty of options – both fancy and budget-friendly.

Click here to check prices for your dates.

Kex Hostel

Kex Hostel

You probably know this place from my list of the best accommodation options in Iceland. Located in the country’s capital, it does offer a lot for the money and, just like most hostels, is very quirky and fun.

This lively hostel (and bar / cultural center / local’s favorite) hides behind a plain door with a tiny sign and barren stairwell behind it. It’s easy to miss, but it would be a shame to do so, especially if you’re looking for budget accommodation.

The Kex hostel is as affordable as it gets, but the space is still beautiful and the bedding and mattresses are high-quality.

It attracts a funky and very diverse crowd which might be a hit or miss. These are the risks of spending a night (or more) in a hostel…

But you probably know this already and just want a nice place to sleep for a few hours, meet lots of people and have fun. This is it!

Click here to check it out

Hostels In Iceland: Final Words

Iceland is a land of ice and fire in the true sense of the world. The sheer force of the elements makes a warm, cosy accommodation top priority for all travelers.

Iceland is also incredibly backpacker-friendly. The good news is that regardless of your budget, there will be a cool option for you.

The bad news – a tiny budget has an entirely different meaning here and some hostels in Iceland cost as much as 5-star hotels in other parts of the world. Thank the high salaries and high cost of living for that!

Either way, the country is welcoming an all-time high of tourists and this time the crowd is really onto something.

And I am sure that you will find the list of recommended hostels above really useful. Pick your favorite and enjoy your stay!

And if hostels are not your thing, I also wrote about the 5 best unique hotels in Iceland – make sure to check that article out as well for some extra options if you couldn’t find your favorite here.

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