Iceland is the “it” place of the year, there is no denying that. One of the most beautiful and safest countries in the world, Iceland is starting to attract more visitors each year.
As a result, Iceland’s travel industry has boomed in the last couple of years. But figuring out where to stay in Iceland – especially if you’re looking for cheap, yet high quality accommodation in a country where the cost of living is so high is not that easy.
If you want to skip all the talking, my top recommendation is Apótek Hotel Reykjavík. An absolutely amazing experience to stay here. Trust me!
But luckily you have us, and you have the entire travel blogosphere, too. Actually, scratch that. As much as I enjoy travel bloggers, here is a piece of advice I learned the hard way:
You have to pick a single source.
Now, I am not saying that Nomad Not Mad should be your single source. The point is that different people online have different expectations, travel styles, and ultimately different experiences.
When you are looking for where to stay in Iceland (or anywhere else in the world, really), it is wise to listen to just one source. Bonus points if you’re on the same wavelength.
Different articles contradict each other and it’s plain confusing. So with that disclaimer in mind, here is my take on the best accommodation options in Iceland for the budget minded.
Best Places to Stay in Iceland
IMPORTANT: Make sure to double check pricing. Prices are influenced by season and other factor, so always check out all the recommendations below to find the best option for you.
Apotek Hotel – Best choice
If you have traveled around enough, Apotek probably sounds familiar. It means pharmacy and the same root word exists in plenty of European languages.
So what does a pharmacy have to do with this Reykjavik hotel? Well, it used to be one!
The place was originally built in 1917 and it quickly became a recognizable landmark. The Apotek then went through periods of abandonment: it was a restaurant, then a club, and finally, a hotel, opened in 2014 and operating ever since.
Apart from the interesting history, the Apotek boasts delicious breakfast (and food overall). You do have to pay extra but the food is definitely worth it.
As for design and comfort, they get a 10/10 for the latter and perhaps… 8/10 for the former.
Don’t expect interior design wonders but the rooms are still cosy, pristinely clean, and very recently renovated. And if you’re into minimalist design with retro vibes, you’re probably going to rate it even higher than I do.
Either way, if you’re not on a shoestring budget, Apotek Hotel in Reykjavik is definitely your best choice in Iceland.
Kex Hostel – Best Budget Option
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 is the sort of place a friend or maybe your Icelandic girlfriend brings you to.
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…
You see a lot of kids from other parts of Iceland staying here for a couple of nights but there are also plenty of travelers.
The place itself looks whimsical and it definitely doesn’t take itself too seriously. The room signs are pinball machine displays, for example!
The downside here is that the Kex is not very family-friendly. The reception doubles as a bar and a lot of the guests are not exactly opposed to long nights of drinking and partying. The hostel does not accept children and it’s not child-appropriate, either.
I realize the last few sentences make the Kex sound like a place for junkies. Don’t worry, it’s just… better suited to adults.
Stracta Hotel – Nature, Right At Your Doorstep
Although the Stracta is not inside Reykjavik, it is a decent competitor to the city’s best hotels. There are three main advantages to choosing this accomodation:
- Great value
- Amazing location – an hour away from Reykjavik but unbeatable views of the mountains and glaciers
- The perfect base to start the Golden Circle (Iceland’s ring road that shows you all the beautiful places in the countryside).
Of course, staying outside of Reykjavik is not for everyone.
If you are mostly in for nature (a.k.a. the incredibly photogenic views), the Stracta is your place. In my opinion, going further into the countryside is not worth it.
Granted, you will have a more authentic local experience but there is also not too much to do out there.
But this place offers the best option for both worlds. The rooms are cozy and comfortable (although also on the minimalistic side), you have plenty of amenities including outdoor saunas and even private hot tubs.
Worth checking out, offering a great mix of quality and affordability for an Icelandic hotel.
Hotel Holt – For Art Lovers
This one just begs to have a dark mystery novel set in it. The family-run Holt hotel has a near obsession with art.
No two paintings in the rooms are alike and the walls in all common areas are also covered in art. In other awards – it’s really amazing!
The bar looks straight out of a noir movie, not to mention the private dining lounge and the balconies with views over Tjörnin.
This is the place for seduction, a delightfully old-school and decadent space. The downside, of course, being that it is not at all budget-friendly.
I guess you only go to Iceland once! So make the most of it by checking out this hotel – it is, after all, one of the best places to stay in the country!
Tips for those looking for the best place to stay in Iceland
Now, let’s move forward and actually check some actionable tips – or at least VERY important tips for those who plan to travel to Iceland and are looking for a place to stay.
1. Adjust Your Expectations
Iceland is not a place of extremes. You will not find extremely cheap options here. Super fancy world-class luxury is not a thing either.
There are upscale hotels but nothing like you’d find in Dubai or Las Vegas, or other international outrageous luxury destinations like that.
As for the budget travelers, while it is possible to do Iceland for cheap, the country is still quite expensive. It’s the same with the nearby Norway, but I have an article on how to visit Norway without going broke, in case you’re interested.
Back to Iceland, this is actually the first thing you hear about the place – along with the rest of Scandinavia. If you are broke, don’t go to Iceland.
Except, that is not necessarily the case. The plus side of a country with a very high living standard is that even inexpensive stuff is very good.
In this case, even the cheapest youth hostel will be better than the European average for those establishments. Make sure to check out my previous article sharing the best hostels in Iceland for even more options.
Nothing super n.
2. Look into the Reykjavík Area First
Time for a little pop quiz. How big is the population of Iceland? Around 372,500 people as of 2023.
Yes, that is for the entire island, not just a single city! And, even if it was just one city, it wouldn’t be a metropolis.
Just to compare, that is more or less the population of Oakland (U.S.), Leicester (England), or Nice (France).
When you spread out 300,000 people over an entire country, you get a bunch of small towns and villages, scattered around the map.
The roads are great in Iceland and the Internet is super fast is a thing so people don’t just flock to a single huge city. Living in the countryside is far more pleasant in the eyes of many.
Since this is a small country and most of the towns are tiny, Reykjavík is the obvious choice when picking where to stay in Iceland.
You would have plenty to do and see, plus it is the best starting point to explore the rest of Iceland.
3. Where To Stay In Iceland: Hotel vs Apartment
There are the obvious perks of a rental, especially if you plan to move to Iceland. But also good for shorter time stays.
- A full kitchen so you can make some of your meals and save money on eating out.
- More and more varied amenities. For instance, a lot of Reykjavik Airbnb rentals have bikes at your disposable.
- The host can give you great recommendations (while concierges usually send you to trendy, touristy places)
- Better WiFi (in most cases)
And the perks of a hotel:
- Quick and efficient check-in at any time of the day (or night).
- Great for short-term stays where you don’t need a kitchen, you need a no-fuss grab the keys and off to your room experience.
- The breakfast is included usually (and, to be honest, Reykjavik hotels give you pretty awesome food).
- Most have gyms so you can keep up your workout routine while you travel.
- Maids! The room will be nice and clean every time you go back. There aren’t people to clean up after you in an Airbnb.
Ultimately, it’s up to you.
There isn’t much of a price difference in the case of Iceland hotels versus rentals, though. Mostly it’s the variety of the other perks.
For the purposes of this article, I am giving you a choice of hotels because Airbnbs have a much more unpredictable schedule and I can’t be sure the places I like would be available for when you are going.
Where To Stay In Iceland: Outside Reykjavik
Although I would strongly encourage you to pick the capital, there are still some beautiful accommodations available in the countryside.
My main tip here is to plan your trip first and the place to stay second. In other words, don’t be tempted by beautiful hotels in the middle of nowhere.
Trust me, there is plenty of beauty to see in Iceland. You don’t have to plan an entire journey around the place you want to stay at.
With 4 top recommendations on where to stay in Iceland, as well as actual tips and tricks to follow when visiting this small country, you should be all set.
Do you agree with my tips on where to stay in Iceland? Have any tips of your own? Let us know in the comments down below.