Explore affordable lodging across Iceland to see where budget-friendly stays are truly available. This guide focuses on economical accommodation options throughout Reykjavik and major regions, highlighting properties that help keep your nightly expenses down. Use this information to determine the most cost-effective way to stay in Iceland while organizing a practical itinerary.
Planning a trip to Iceland often begins with grand expectations, but lodging costs can dictate the entire budget. While prices are generally high, there are still effective ways to lower your spending by selecting the right budget hotels in Reykjavik and surrounding areas, particularly when you know where affordable options are realistically located.
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Many <a s examine the top 10 cheap places to stay while visiting Iceland.
Key Takeaways
Iceland provides a wide selection of affordable places to stay, including hostels, guesthouses, and budget hotels throughout Reykjavik and along the Ring Road.
Reykjavik is the traveling outside of the peak season helps secure better rates on lodging, tours, and transportation.
Travelers booking through Guide to Iceland can utilize VIP Club access to <a s Black Sand Desert
Small Group 10 Hour Tour of the Silver Circle with Canyon Baths, Waterfalls & Reykholt
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10. Hotel Muli (Reykjavik)
Hotel Muli is a reliable choice for travelers seeking budget hotels in Reykjavik that provide good value without being located directly in the city center. Situated near Laugardalur Park, the hotel offers easy access to swimming pools and local amenities, with central Reykjavik reachable by car or public transit.
The quieter environment makes Hotel Muli particularly well-suited for guests who prefer a peaceful place to rest after full-day sightseeing tours. It is especially convenient for those with a rental car, thanks to accessible parking and quick routes to major roads. Family rooms, self-check-in, and an on-site cafe serving breakfast enhance its practicality for both short and extended stays.
Hotel Muli is a great fit for travelers planning day trips from Reykjavik, offering simple road access to popular routes like the Golden Circle and the South Coast.
9. Nordurey Guesthouse and Nordurey Hotel City Garden (Reykjavik)
Nordurey Guesthouse and Nordurey Hotel City Garden are two affordable lodging options in Reykjavik, each catering to a different travel preference.
Nordurey Guesthouse is located within walking distance of downtown Reykjavik and is ideal for travelers who want to remain close to major sights. The rooms are simple and comfortable, featuring shared bathrooms and access to a communal kitchen, which helps keep costs down. Popular landmarks such as Hallgrimskirkja Church are nearby, making it a convenient base for exploring the downtown area on foot.
Nordurey Hotel City Garden is situated in the quieter Laugardalur area and provides private, modern rooms within a residential setting. The neighborhood is perfect for walks and offers a more tranquil atmosphere, complete with an on-site garden where guests can unwind after a busy day of sightseeing in Reykjavik.
Both properties offer affordable choices for hotels and guesthouses in Reykjavik, allowing you to choose between a central location or a more serene neighborhood without overextending your budget.
8. Akureyri Backpackers (Akureyri)
Hafnarstraeti Hostel is located in the northern town of Akureyri and provides an ideal mix of comfort, affordability, and a vibrant social atmosphere. Situated on one of the town’s primary streets, it offers easy access to shops, restaurants, and cultural sites, including Akureyrarkirkja Church, the Hof Cultural and Conference Center, and the Akureyri Botanical Gardens.
The hostel features capsule-style sleeping pods in mixed dormitories, available in both single and double sizes. These offer more privacy than traditional bunks while keeping prices low. Beyond the pods, there is a communal area with a kitchen, multiple bathrooms with showers, and a relaxing lounge.
Akureyri’s location makes this hostel a practical base for exploring North Iceland. Many popular activities in the area, as well as nearby highlights like Godafoss Waterfall and the Diamond Circle, are easily accessible by car.
6. Dalahyttur Lodges (West Iceland)
Dalahyttur Lodges is a hidden gem nestled within the expansive, open landscapes of West Iceland. It provides budget-friendly cabins and rooms for travelers who desire space, scenery, and a quieter place to stay. The setting gives the lodges a rustic charm while still offering the necessary comforts after long days of exploration.
Located near the Snaefellsnes Peninsula, the lodges make it simple to reach many of the region’s most famous sights or join guided Snaefellsnes tours. Nearby attractions include the Eldborg Crater, the seal-watching beach at Ytri Tunga, and various coastal villages along the peninsula. The location is also convenient for travelers continuing their journey through West Iceland or planning tours in the Westfjords.
Accommodation options range from simple cabins with kitchenettes to rooms with shared facilities, all featuring countryside views and complimentary parking. Dalahyttur Lodges are best suited for travelers seeking solitude and a deep connection to the Icelandic landscape.
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5. Hotel Dalvik (North Iceland)
Hotel Dalvik is a flexible option for travelers seeking budget-friendly stays in North Iceland that accommodate various budgets and group sizes. It is one of the more practical lodging choices in Dalvik, positioned along the coast of Eyjafjordur with easy access to local services and a short drive to Akureyri.
The region is well-known for whale watching, particularly during the summer, making the hotel a great base for wildlife-focused trips. It is also convenient for exploring North Iceland, with the Godafoss waterfall, the Diamond Circle route, Lake Myvatn, and nearby geothermal areas all reachable by car.
Accommodation ranges from shared dorms to private rooms. Bungalow-style units, similar to cottages in Dalvik, are also available for travelers who prefer more space and independence. These units include their own kitchen and living area, making them a practical choice for families or longer visits. Shared kitchens, free Wi-Fi, parking, and breakfast help keep overall costs manageable.
4. Hafaldan HI Hostel | Old Hospital (East Iceland)
Hafaldan HI Hostel | Old Hospital is one of the most budget-friendly accommodations in Seydisfjordur, a town celebrated for its character and location in East Iceland. Housed in a former hospital, it blends historical charm with modern comfort, placing guests within easy reach of various East Iceland attractions right from the village center.
Seydisfjordur sits slightly off the Ring Road, which helps keep the area quieter than other parts of the country. From here, travelers can easily visit nearby highlights such as Egilsstadir and the Vok Baths, along with the lesser-traveled landscapes of the Eastfjords. Shops, cafes, and essential services are all within walking distance.
The hostel offers a mix of private rooms, family rooms, and dorm-style lodging, making it suitable for various budgets and group sizes. Guests have access to shared kitchens, comfortable common areas, free Wi-Fi, and a small on-site sauna—a rare perk among budget stays in Iceland.
3. The Barn (South Iceland)
The Barn is a charming and affordable accommodation located on the South Coast of Iceland, near the village of Vik. This rustic yet modern hostel offers family rooms with bunk beds for larger groups and double rooms for those desiring more privacy.
A primary advantage of staying at The Barn is its location along the Ring Road, making it a convenient stop for South Coast travel. The Reynisfjara Black Sand Beach is just a short drive away, while well-known sights like Skogafoss and Seljalandsfoss are also easily accessible by car. The area around Vik provides access to shops, services, and several nearby natural landmarks.
With its welcoming environment, shared facilities, and prime location, The Barn is a practical choice for travelers looking for an affordable base while exploring Iceland’s South Coast.
2. Hotel Cabin (Reykjavik)
Hotel Cabin is a dependable option for travelers seeking the <a s major attractions, such as Hallgrimskirkja Church and the Harpa Concert Hall. The city's main shopping street, Laugavegur, is just around the corner, placing many activities, restaurants, bars, and shops right outside the door.
The hostel offers a mix of dorm beds and private rooms to suit various budgets, along with amenities like a communal kitchen, laundry facilities, a gym, and a library. More than just a place to sleep, Kex Hostel is a lively social hub featuring regular live music, events, and some of the most affordable beer in the city, earning it a reputation as one of the best live music venues in Iceland.
For those seeking an affordable stay without sacrificing atmosphere, fun, and convenience, Kex Hostel is an excellent choice.
Popular tours
Incredible 1-week Summer Self-Drive Tour of the Ring Road of Iceland & Golden Circle
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Other Ways to Save Money When Visiting Iceland
Beyond selecting affordable lodging, there are several simple ways to save money in Iceland while planning your trip. Small decisions regarding food, timing, and discounts can noticeably reduce your daily expenses without limiting your experiences.
Book early and travel outside peak season: Reserve your accommodation, tours, and flights to Iceland well in advance, especially outside the busy summer months.
Use discounts and special offers: Travelers booking through Guide to Iceland can utilize VIP Club access, which includes discounts at select restaurants, cafes, bars, and shops, including affordable dining options and bars in Reykjavik.
Finding the best cheap places to stay in Iceland comes down to choosing accommodation that aligns with your travel style and itinerary. Reykjavik is ideal for travelers joining guided tours or short excursions, while guesthouses and hostels around the country offer better value for those planning longer routes.
If you are traveling independently, budget stays along the Ring Road are perfect for self-drive tours, providing easy access to top destinations without the need to return to the capital each night. Whether you prefer a social hostel, a simple guesthouse, or a private countryside cabin, planning ahead and remaining flexible makes it easier to keep costs low while seeing more of the country.
Frequently asked questions
How much does it cost to stay in Iceland?
Accommodation in Iceland typically costs at least 100 USD to 150 USD per night, depending on the lodging type, location, and time of year. Costs in Reykjavik are generally higher, and prices rise further during the peak summer months. Travelers who book early and compare options can find cheaper guesthouses, hostels, and budget hotels across Iceland.
Is it cheaper to stay outside Reykjavik?
Yes, many of the most affordable places to stay in Iceland are located outside of Reykjavik. As the capital, Reykjavik has higher accommodation prices due to demand. Budget travelers often find more economical options in Selfoss, Vik, Akureyri, and other towns along the Ring Road and South Coast. Staying outside the capital is one of the simplest ways to reduce your accommodation expenses.
Where do most people stay in Iceland?
Most visitors stay in Reykjavik because it offers the widest range of accommodation. However, travelers searching for cheap places to stay often choose guesthouses and budget hotels outside the city center or in smaller towns along the Ring Road. While Reykjavik is convenient, staying elsewhere can significantly lower your costs.
Which part of Iceland is best to stay in?
The best place to stay depends on your budget and travel plans. Reykjavik is convenient for sightseeing and tours but is usually more expensive. The South Coast, including Vik and Selfoss, offers a mix of mid-range and budget accommodations near waterfalls, glaciers, and black sand beaches. Smaller towns along the Ring Road often provide some of the cheapest lodging, especially in guesthouses and countryside cabins. Budget-conscious travelers typically find the best value outside the capital region.
Are there cheap places to stay in Iceland for families?
Yes, there are affordable options for families, particularly in guesthouses, cabins, and hostels that offer private family rooms. Many budget accommodations provide shared kitchens, helping families reduce food expenses.
Staying outside Reykjavik or in smaller towns along the Ring Road often provides more space at lower prices. Booking early is essential to secure affordable family accommodation during peak travel months.
That concludes our guide to the top 10 cheap places to stay in Iceland. Did we leave any of your questions unanswered? Do you have any stories of staying in budget accommodation during your visits to Iceland? Let us know in the comments below!