Where to Stay in Iceland – Best Areas For All Budgets

Best Places to Stay in Iceland for All Budgets

Are you heading to Iceland soon and wondering about where to stay in Iceland? Lucky you! Iceland has become incredibly popular and with all the country has to offer, it’s no wonder!

Winter months bring an ideal location to spot the Northern Lights, and during the summer months, you can explore the gorgeous green countryside and black sand beaches. Whether you visit Iceland in winter or Iceland in summer – you will surely have a unique experience.

Iceland can be pricey, but there are ways to travel for all budget types. Whether you like the city or the countryside, prefer luxury or need somewhere more simple to sleep at night there is a wide range of options of accommodation to choose from!

Iceland where to stay - best hotels in Iceland for all budgets

Disclaimer: This post contains affiliate links. This means I might earn a small commission when you buy a product/service via my link (at no extra cost to you). More about it here.

Today, it is all about the best places to stay in Iceland – here are tips for your Iceland itinerary.

Luxury Hotels in Iceland

Let us start with some of the best luxury hotels in Iceland.

Hotel Ranga in Hella 

Hotel Ranga is about 1 ½ hours from Reykjavik. This is an option in Southern Iceland for those who are looking to spend more time in nature.

If you’re visiting to see the Northern Lights in December or spending time doing outdoor activities, this is the place for you. With the best of both worlds, you have access to the beautiful outdoors without having to rough it.

Mountain Kirkjufell and Aurora in Iceland Northern Lights in Iceland

Renowned for their stargazing, they actually have a mini observatory on-site! Only 150 meters from the hotel, you can enjoy spectacular views from their telescopes.

Hotel Budir in Ólafsvík

This 5-star option lies about 2 ½ hours north of Reykjavik in the beautiful coastal countryside.

All rooms have a lovely view – whether it’s of the ocean, mountains, glaciers,s or lava fields. Their 5-star restaurant is all locally sourced fresh foods, and their rooms have a traditional style, so you truly feel immersed in Icelandic culture. Enjoy your outdoor excursions and beautiful night skies without sacrificing any luxuries.

They will assist you in booking excursions and provide a wake-up call during the night if the northern lights appear!

Read more: Looking for Iceland itineraries? Here is an Iceland itinerary with many great tips.

Tower Suites Reykjavik

The most luxurious option for staying in Reykjavik are the Tower Suites.

Known to house celebrities on vacation and have some of the best views from their high levels rooms, this is the perfect option if you like to stay in luxury on your travels. The location is right on the waterfront but still within walking distance to the center of town. 

They have organic breakfast complimentary each morning, and their amazing concierge service will help get you dinner reservations at all the best spots in town!

If you plan to drive throughout Iceland and explore other areas of the country on your trip, I recommend the Kea Hotels Chain as a good luxury option that has several properties spread throughout Iceland.

Boutique/Unique Luxury Option

Here are some very unique hotels in Iceland.

Hotel Silica

The famous Blue Lagoon of Iceland! Chances are you will be visiting here on your trip, so why not stay here?

where to stay in Iceland
@shutterstock Blue Lagoon

If the Blue Lagoon is on your Iceland itinerary, then Hotel Silica is a great choice.

Hotel Silica has its own private thermal pool, “Silica Lagoon,” for its guests with a poolside waiter. Your stay also includes a complimentary premium admission to Blue Lagoon (only a short walk from Silica Lagoon), a fitness center, and daily breakfast. This is the best way to experience the thermal pools of Iceland, hands down.

Mid-Range Hotels in Iceland

Here are some great mid-range hotels.

Reykjavik Centrum in Reykjavik 

Just like the name suggests, this is right in central Reykjavik! This is the perfect location to walk around and explore, and you can easily do day tours from Reykjavik.

The rooms are simple standard hotel rooms, but it’s all about location here. Lovely spot downtown, a cobblestone street with plenty of dining options, and nearby the hop-on and hop-off bus stop. The hotel itself also houses its own bar and café for those nights when you feel like taking it easy or staying in.

Radisson Blu 1919 in Reykjavik 

The Radisson Blu is also located in central Reykjavik, with their restaurant 1919 on-site serving locally sourced foods.

This is another great option for travelers looking for a mid-range option with walking distance sights, shops, and restaurants. Close to the national art gallery and old harbor. They have a fitness center on the property if you like to keep in shape while traveling! They also have a convenient app that displays hotel specials as well as must-see nearby spots.

Hotel Laxnes in Mosfellsbaer

Their motto is “Enjoy the Best of Both Worlds,” located only about 20 minutes from Reykjavik, you are close enough to enjoy but also far enough to have some more seclusion, quiet and better viewing of night skies.

They have an outdoor hot tub perfect for relaxing under the night sky and free parking on-site, making it a good starting point for an Iceland road trip. They serve breakfast daily and have a bar on the property as well.

Laxnes also offers their own day tours to explore the area and night tours to go out and hunt for the Northern lights.


If you plan to drive throughout Iceland and explore other areas of the country on your trip, I would recommend the Iceland Air Hotels Chain as a good mid-range option with several properties spread throughout Iceland.

Boutique/Unique Moderate in Iceland

Here is a boutique hotel in Iceland for the mid-range hotel.

Ion Adventure Hotel in Nesjavellir

This property is perched about 1 hour east of Reykjavik. This is a stunning and uniquely designed hotel.

Even the drive there will have some beautiful scenery to enjoy along the way. This is a great spot to enjoy nature’s beauties and the northern lights if you go over the winter season.

The hotel is done in a modern design, and they have a restaurant with great food, too. It’s the perfect way to enjoy the outdoors and seclusion of Iceland without being terrible far from Reykjavik’s drive making it a nice stop after spending some time in the city. They also have a lovely spa on site where you can enjoy facials and massages using Icelandic herbs.

5 Million Star Hotel – Buubble Stays 

Known as the “5 Million Star Hotel,” Buubble is a unique inflatable igloo-style accommodation in the great outdoors.

This gives you an amazing view of the night skies during winter. You can lay under the Northern Lights with completely unobstructed views watching from the bed or in the summer under a star-filled sky.

These are set up as a single-night stay at the end of a full-day tour (either Golden Circle or Southern Coast). What an amazing and fun way to spend the night after a day of visiting gorgeous sights in Iceland!

Tip: Do you know what to pack for Iceland? Find this comprehensive Iceland packing list.

Mountain Kirkjufell and Aurora in Iceland Northern Lights in Iceland

Budget Hotels in Iceland

Here are some budget hotels in Iceland.

Hotel Fron in Reykjavík

This is a great central option for budget travelers. Reasonable pricing without sacrificing a good walkable location!

They are simple apartment-style lodging rooms with daily breakfast served and free wifi. They also have a Scandinavian restaurant and bar on-site and parking available, which is perfect if you plan to take a road trip and continue exploring the country after Reykjavik.

Arctic Comfort Vik in Reykjavík

This option is a little farther- just outside of Reykjavik but only a 5-minute walk to the bus stop for easy transportation in and out of the city.

Walkable distance to several restaurants and a food market as well. Arctic Comfort Vik also has free parking, free wifi, and a daily breakfast buffet making it convenient and having all the necessities available.

Unique Stays in Iceland

Here is an amazing and unique place to stay on a budget.

Kuku Campers

The best way to see Iceland outside of Reykjavik on a budget is camping. Kuku Campers is an awesome option offering campers (so you don’t need to completely rough it), and you can explore the country freely.

They also provide their own hand-drawn maps so you can see where you need to stop on your way around Iceland! Perfect pairing with is a “Camping Card Iceland” this is a card that gives you entry and access to tons of campgrounds throughout the country so you can stop and relax at night and have showers etc., all available to you.

It is very popular to travel this way in Iceland, and you’ll meet plenty of fellow travelers along the way enjoying the gorgeous nature Iceland has to offer!

Hopefully, this post has helped you find the perfect accommodations for your trip to Iceland! Have a wonderful time in this unique place!

About the Author: Cassandra is a US-female travel addict who loves traveling the world and works as a tour operator. She is a freelance writer for Arzo Travels, where she shares her expertise.

Follow Cassandra on Instagram

Safe Travels, Arzo

Pin It on Pinterest