Iceland is ridiculous in the best possible way. Volcanoes hiss under glaciers, waterfalls crash out of nowhere, and the landscape looks like it’s permanently auditioning for a fantasy movie with a very big budget. But here’s the thing: although it’s kinda small, Iceland is not really a country you can wing. Where you stay matters more here than almost anywhere else.
I’ve visited Iceland more than once and one thing that quickly became apparent is that distances here are deceptive. A place that looks close on the map can easily turn into several hours of driving through windswept lava fields, while accommodation choices can make the difference between spending your evenings soaking in a hot spring or staring at your sat-nav wondering how you’re still not there yet.
Choose badly and you’ll haemorrhage cash, rack up endless drive times, and spend half your trip wondering why a ham sandwich costs the same as a hostel bed in Southeast Asia. Choose wisely, though, and Iceland becomes pure magic.
That’s where this guide comes in.
Whether you’re road-tripping the Ring Road, chasing the Northern Lights, soaking in geothermal pools, or just trying to experience Iceland without selling a kidney, picking the right base is key.
So whether you’re an over-caffeinated landscape photographer, a family planner with spreadsheets, or a slightly lost internet traveller who clicked “Iceland” and hoped for the best — welcome. You’re in safe hands.
Below, we break down the best areas to stay in Iceland, who each one is for, and what you’ll actually get out of basing yourself there. No fluff, no hype — just solid, on-the-ground advice to help you spend less time driving and more time being blown away.
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Where to Stay in Iceland – Iceland Neighborhood Guide
Reykjavik
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.
Husavik
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!
Laugarvatn
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.
Akureyri
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?
Reykjavik
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.
Hvolsvollur
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.
Snaefellsbaer
Snaefellsbaer is a small town located in Western Iceland. It’s packed with incredible adventures waiting for you to get your adrenaline rush in!
Reykjanesbaer
Staying in Reykjanesbaer means you have easy access to seeing the Northern Lights if you rent a car.
The land of ice and fire is a must-visit and sits high atop many a bucket list. With incredible volcanos, waterfalls, glaciers and fascinating nordic culture, there’s plenty to do in Iceland. However, it’s earned itself a bit of a reputation as an expensive destination and most of the sites are pretty spread out despite it being a relatively small country.
However we will also say , that Iceland is the perfect backdrop for an unforgettable road trip so you dont need to limit yourself to just the one area.
Renting a car or camper van is a practical and exciting way to explore the country. Start by checking out thoughtfully designed camper vans for rent, tailored for comfort and convenience. Travel seamlessly from one hiking trail to the next, camp at designated spots with ease, and enjoy the confidence of having a warm, cozy home on wheels—no matter where your adventure takes you. Note that you can even stay at some campsites in Iceland with a campervan but do check ahead.
If you’re wondering where to stay in Iceland we have got you covered! As a sparsely populated country, Iceland has plenty of space and room to breathe. That means that lodging in Iceland can be truly special!
Iceland’s Top Areas in Just 2 minutes
This guide is fairly long so if you are in something of a hurry, we have provided a quick synopsis below.
- Reykjavik: The capital city of Iceland offers the best value for money across the whole country. For me, it also rates as the best place to stay in the whole of the country. Its transport links and access to tours and rentals make it an awesome base for exploring further, especially if you’re a backpacker.
- Husavik: This small coastal settlement in North Iceland rates as the best place for families. The whole country is super safe so that’s nothing to worry about, but as the whale watching capital of Europe, you can keep the kids entertained! There are also some of the best Iceland hotels for families too with heaps of awesome facilities.
- Laugarvatn: This charming tiny town is home to just 200 people and its laid back vibe is just perfect for couples looking to get away from it all. It’s still only a short drive from the capital too if you fancy a bit more action but the beautiful lake, mountain views and thermal springs make it a romantic spot.
- Akureyri: If you’re a bit of a hipster looking for the coolest place to base yourself in Iceland then you can’t beat Akureyri. Its colourful wooden houses, understated bars and the opportunity to partake in some epic extreme sports make it a super cool spot.
- Hvolsvollur: This teeny-tiny town is one of the most unique spots. It’s got funky rock formations, mountains, caves, waterfalls, and natural hot springs and it’s pretty off the beaten track too and not far from Iceland’s south coast if you want some seaside vibes.
- Snaefellsbaer: If you’ve come here for adventure then Snaefellsbaer is the place for you. This small town (yeah, another!) has some awesome hiking opportunities and is close to some of the most impressive waterfalls on the island. From here you can also explore the black sand beaches and go caving too!
- Reykjanesbaer: If seeing the Northern Lights is your main priority when it comes to visiting Iceland, then you’ve got to base yourself in Reykjanesbaer. You’ll still need to get away from the city lights but this area allows the easiest and quickest access to the areas known for the lights.
The 8 Best Areas & Towns in Iceland
Now it is the time to unleash the detail. Top picks, things to do, and occasional passing comments upon the beauty of the Icelandic. Icelandic topography. Just remember to pick a good time of year to go, because this little piece of rock can get chilly, some say.
1. Reykjavik – Overall Best Place to Stay in Iceland
The capital of Iceland is Reykjavik which 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, and 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 harbour to quaint Airbnbs with cosy kitchens alongside plenty of budget hotels too. There are also quite a few luxury hotels just outside the city centre too if you’re feeling a bit extra. The capital is a great place to start and end your golden circle trip from.
If you’re looking to stay in Reykjavik, then you’ll want to stay in the heart of the capital city 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? (ED: Never!!!!!)
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!
Best For: first-time visitors, nightlife, culture, food, short stays, car-free trips.
The Vibe: compact, colourful, and creative — a small capital with big personality, cosy bars, design shops, museums, and an easygoing Nordic feel.
Proximity to Airport: ~50 km from Reykjavík / Keflavík International Airport (KEF) .
Transport Level: Easy – very walkable city centre; buses and airport shuttles widely available (most travellers don’t need a car here).
Budget: Mid-range to high – Iceland prices hit hardest here, especially for hotels, food, and nightlife.
Crowds: Moderate to high – busiest in summer and during festivals; quieter in winter outside peak Northern Lights season.
Top Things to Do in Reykjavik
- Tour the towering cathedral of Hallgrimskirkja
- Be a classic tourist and go watch some whales!
- Taking in a show at the Harpa Concert Hall
- Investigate the extremely interesting and not at all alcoholic Reykjavic craft beer scene. A pleasant evening for all involved…
- Meander around all the curious museums, including the Arbaer Open Air Museum to the more risque Icelandic Phallological Museum
- Decide that you would like to see some of downtown Reykjavic after all, so book onto a guided walking tour.
- Visit one of Reykjavik’s local heated pools
Best Airbnb: Downtown Reykjavik Studio
Offering style, class, and a location that will make you dribble with anticipation, this studio is one of Reykjavik’s best Airbnbs. Offering a superb space for up to 5 guests, the modern and subdued décor offers a surprisingly cosy atmosphere, and the kitchen is well stocked. Despite it’s excellent location, it is quiet and calm, making it perfect for relaxing during your first few days in Iceland. The city centre is literally out the front door!
Best Hostel: Loft HI Hostel
Scandi-chic and eco credentials combine to make the Loft HI Megazord, *ahem, hostel. This excellent space is awash with the buzz of travellers, a four hour happy hour (happy evening?) and comfortable bunking. With a rooftop terrace and a love for lively pub crawls, drag events and karaoke, it is one of the most social hostels in town. If you’re looking to kick off an excellent Icelandic trip in style, don’t hesitate to book the centrally located Loft HI…
Best Hotel: The Reykjavik EDITION
If you’re into dark and mysterious vibes that make you think of romance and movie villains, then the Reykjavik EDITION is the slice of class you’ve been looking for. The sauna and hot tubs are the answer to any long day of exploration, and the on-site bar will resolve any lingering niggles you may have…
Each room is equipped with a private bathroom, flat screen TV and safety deposit box. Rooms are less edgy, bright, and actually pretty cheerful.
2. Husavik – Best Place to Stay in Iceland For Families
Boasting exceptionally low-crime rates Iceland is a very safe country. It’s 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 in this area of North Iceland! 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. I stayed here during my 4-day vacation in Iceland and it proved to be a highlight.
As Husavik is a tiny settlement in North 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.
Best For: whale watching, nature lovers, slow travel, road-trippers, North Iceland exploration
The Vibe: quiet, charming, and scenic — a small harbour town with a relaxed, end-of-the-road feel and strong ties to the sea
Proximity to Airport: ~75 km from Húsavík via Akureyri Airport (AEY).
Transport Level: Moderate – walkable town centre, but a car is strongly recommended to explore surrounding sights and North Iceland
Budget: Mid-range – accommodation and tours aren’t cheap, but generally better value than Reykjavík; whale-watching tours are a major cost factor
Crowds: Moderate – busy during summer whale-watching season (June–August), very quiet outside peak months.
Top Things to Do in Husavik
- The whole family will be dazzled watching the humpback whales swim through the frigid waters of Skjalfandi Bay
- Walk around Husavik and soak up some local knowledge. History & facts. Love it.
- You can always add a puffin-watching tour to your trip too. Those quirky little birds sure are entertaining!
- There’s also the Exploration Museum that focuses on space missions
- Get even closer to those giant mammals by grabbing your own whale watching boat, perfect for seeing them in their natural environments!
- Walk around the beautiful Lake Myvatn and explore the surrounding areas
Best Airbnb: 2 bedroom cottage cuddled into nature
This two-bedroom/ one-bathroom apartment has a total of three beds. That means that sleeping up to four people is easy. There’s also a porch area with epic views of the mountains from this cute cabin. Perfect for families and small groups! Expect a short walking distance to all local attractions. And enjoy whipping up family meals in the fully equipped kitchen!
Best Guesthouse: Arbol Guesthouse
This historic house in the centre of Husavik offers simple and clean rooms. However, you’ll love the nearby scenery! You’ll be situated just a short walk from the harbour, 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 Hotel: Fosshotel Husavik
A pet-friendly hotel in the heart of Husavik, this gem features an in-house restaurant and a large, stylish lounge. You can easily walk to the port, where boats depart for engaging in whale watching. If you’re a lucky boy, you may even get a room with marine themed décor. The tour desk can help you out with any other excursions you fancy doing whilst in the area.
3. 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 special 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 and some of the most wonderful Iceland hotels are located here.
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.
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 favourite Iceland hotels listed below!
Best For: Golden Circle exploration, road-trippers, hot springs, quiet countryside stays.
The Vibe: calm, rural, and low-key — a tiny lakeside village surrounded by geothermal landscapes and open farmland.
Proximity to Airport: ~95 km from Laugarvatn / Keflavík International Airport (KEF).
Transport Level: Limited – a car is strongly recommended; infrequent buses run the Golden Circle but schedules are restrictive.
Budget: Mid-range – limited accommodation keeps prices steady; fewer budget options than Reykjavík but not as inflated.
Crowds: Low to moderate – day-trippers pass through for nearby attractions, but evenings are quiet and uncrowded.
Top Things to Do in Laugarvatn
- Lake Laugarvatn is great for romantic strolls or a spot of fishing
- There is even a spa at Lake Laugarvatn where you can relax in the rejuvenating geothermal baths
- Hunt out the off-the-beaten-track Bruarfoss Waterfall, it’s well worth the effort!
Best Airbnb: Golden Circle Green Lodge
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, but if you want something more private you’ve got your own hot tub.
Best Hostel: Héradsskolinn Guesthouse
Ok, so it’s not a hostel but there aren’t many so budget hotels are gonna cover this gap in Laugarvatn! The Héradsskolinn Guesthouse is actually built into a 1920s school building and so has some great large spaces!
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 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 Hotel: Farmhotel Efstidalur
This hotel is set on 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 favourite part about the Farmhotel Efstidalur is that during the summer, this hotel offers horseback riding and traditional cooking classes! Talk about memorable!
4. 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 cosy bars. Little known fun fact, the stoplights are shaped like red hearts! How darling is that?
The population of Akureyri sits at around 18,000, so it is larger than other settlements, but a bit smaller than the capital. Given its 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…
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! Even if you like to keep things chill, there are plenty of Akureyri activities to keep you busy.
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 For: North Iceland base, road-trippers, winter travel, skiing, whale watching alternatives to Húsavík
The Vibe: laid-back and friendly with a small-city feel — colourful houses, cafés, bars, and big nature right on the doorstep
Proximity to Airport: ~5 km from Akureyri / Akureyri Airport (AEY)
Transport Level: Good – walkable centre, local buses available; car strongly recommended for exploring fjords, waterfalls, and nearby sights.
Budget: Mid-range – generally better value than Reykjavík, with a good spread of guesthouses, apartments, and hotels.
Crowds: Low to moderate – busiest in summer; quieter and more local-feeling than the south, even in peak season.
Top Things to Do in Akureyri
- A trip to Akureyri wouldn’t be complete without taking a dip in the Akureyri geothermal pools
- Discover Akureyri’s zipline infrastructure and soar above a glacial river like an albatross.
- Be charmed by the traditional houses on Hafnarstræti Street
- In the winter, you can take snowmobiling tours around the mountain, or you can even go skiing down Hlidarfjall
- Head out to the gems of the area on a Lake Myvatn & Godafoss Waterfall tour.
- If you’re here in the summer, check out the awesome whale watching opportunities too.
- Indulge the fantasy you have always had of being pulled along by a pack of gorgeous huskies iwith a taste of husky hiking!
Best Airbnb: Day Dream K19
This airy two bedroom apartment can hold up to 6 guests, and has natural light that the outside is envious of. With an understated yet delicate décor, guests can rely on the available amenities to make sure their stay is suitably straightforward. Blessed with an excellent Akureyri location, you can stumble to the majority of local attractions within minutes. It even comes with 2 free parking spots. What a treat!
Best Hostel: Akureyri Backpackers
In this highly functional, and ever-so cosy 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 Hotel: Hotel Akureyri Dynheimar
If you want to feel rather special whilst staying in Akureyri, this is the place to do it! Every room has a unique movie theme, and rather than being tacky, it makes this hotel quirky and exciting. They’re also growing some herbs downstairs in a big lab. Service is superb, there is an onsite bar, and just next door is a restaurant where you can find a superb dinner.
5. 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.
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!
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!
Ok, so you might end up paying the same price for a hostel here as you would for most luxury hotels in Thailand, but hey, we’re working with what’s available!
Top Things to Do in Reykjavik
- Take the free walking tour around the capital city
- Discover the beaches of the south on a south shore adventure!
- Hike up the nearby Mount Esja, one of the closest trails to the city
- Wanna hit the beach, head to Nautholsvik… just maybe pack a wetsuit!
- Get further afield and pump a little adrenaline with a fiendishly exciting quadbike experience.
- Check out the website Hotpot Iceland for information on the many other cheaper and often free geothermal baths as a budget alternative to the blue lagoon.
Best Airbnb: The Old Bicycle Shop
While there certainly are more fancy Airbnbs out there, this one is perfect for budget travellers. 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 Hostel: KEX Hostel
Whilst I would still be tempted to book into Loft HI, for variations sake, you could also try the enigmatic KEX Hostel. They have an excellent location in the heart of the Reykjavik city centre, which means great access to pubs, clubs and live music venues. It is also a ‘painless’ distance from late night munchies. Whatever that means. There is a heated outdoor patio, bar, lounge and café onsite too. Another of the top tier Reyjkjavik hostels.
Best Hotel: Exeter Hotel
With an onsite restaurant, sauna and bakery (a definite underrated trinity) the Exeter Hotel has clawed it’s way into a prime spot in the hotel hierarchy. The Solfar Sun Voyager and Hallgrímskirkja Church are easily reachable on foot, as well as the Laugavegur shopping street. If you want one of the best hotels in Reykjavik, you don’t need to look any further!
6. 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 favourite hikes 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 like natural caves and lovely waterfalls as well as being on the south coast of the country. If you’re looking to take some epic photos in Iceland, then this is a great base.
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!
For those looking to explore Iceland off the beaten path, renting a camper van offers the ultimate flexibility to move from one breathtaking location to another. With a camper van rental in Iceland, you can experience the beauty of the south coast and make stops at sites like the famous Skogafoss waterfall and Seljalandsfoss.
Best For: South Coast road-trips, Golden Circle + South Coast combo trips, waterfalls, volcano history fans.
The Vibe: small, practical, and low-key — more of a strategic stopover town than a destination, with a strong outdoors-and-roadtrip feel.
Proximity to Airport: ~120 km from Hvolsvöllur / Keflavík International Airport (KEF).
Transport Level: Moderate – located right on the Ring Road; buses pass through, but a car is strongly recommended for flexibility.
Budget: Mid-range – limited accommodation keeps prices steady; generally cheaper than Reykjavík but not a true budget hotspot.
Crowds: Low to moderate – steady flow of travellers passing through in summer; quiet evenings and off-season calm.
Top Things to Do in Hvolsvollur
- Spend the day relaxing at Seljavallalaug, Iceland’s oldest swimming geothermal pool.
- Decide that you would like to spend the day in a car, and join a Landmannalaugar jeep tour, which is actually pretty cool.
- One of the country’s most famous waterfalls, Skogafoss is just a short drive away
- Another well-known waterfall nearby is the 200ft Seljalandsfoss.
- Take part in one of the best evenings on the island by dining with a Viking and going horseback riding!
- Head out to the coast and marvel at the mysterious volcanic sea stacks and basalt columns of Reynisdrangar.
- If you want to go glacier hiking then this is a great place from which to book your adventure
Best Airbnb: 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 cosy up and watch the Northern Lights. It’s also not far if you want to explore Iceland’s south coast as well. Talk about special!
Best Hostel: 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 Hotel: Hótel Fljótshlíd
If you’re looking for a quiet, peaceful hotel surrounded by nature then you my friend, are in for a treat. Hótel Fljótshlíd is Located on a horse farm with breathtaking views of Eyjafjallajökull Volcano. The rooms are the perfect place to relax after a busy day exploring and they serve a delicious breakfast in the morning.
7. 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! You sure won’t be bored 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 For: nature lovers, Snæfellsnes Peninsula exploration, photographers, quieter road-trip bases
The Vibe: remote, rugged, and atmospheric — small fishing towns with dramatic coastal scenery, lava fields, and glacier views.
Proximity to Airport: ~190 km from Snæfellsbær / Keflavík International Airport (KEF).
Transport Level: Limited – public transport is sparse; a car is essential to explore the peninsula properly
Budget: Mid-range – accommodation is limited and can be pricey for what you get, but generally cheaper than Reykjavík in peak season.
Crowds: Low to moderate – day-trippers pass through in summer, but it remains calm compared to the South Coast.
Top Things to Do in Snaefellsbaer
- 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.
- Flex your cash by designing a private Snaefellsnes peninsula adventure, perfect for getting offbeat and natural…
- Take a tour of Vatnshellir Cave and travel down into the East to explore an ancient lava tube!
- Visiting the black-sand beach of Djupalonssandur complete with its own shipwreck.
- Set eyes on the magnificent Snaefellsbaer volcano in Snaefellsjokull National Park
Best Hostel: 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: 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 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: 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 harbour along the glacier!
8. 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!
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.
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 For: airport stays, short stopovers, Blue Lagoon access, budget-conscious travellers, early/late flights.
The Vibe: practical and low-key — more functional than charming, with a lived-in, small-town feel and windswept coastal scenery.
Proximity to Airport: ~5–10 km from Reykjanesbær / Keflavík International Airport (KEF).
Transport Level: Moderate – buses and airport shuttles available; a car is helpful but not essential for short stays.
Budget: Budget to mid-range – generally cheaper accommodation than Reykjavík, especially for hotels near the airport.
Crowds: Low – mostly transient travellers; quiet evenings and little tourist congestion outside Blue Lagoon traffic.
Top Things to Do in Reykjanesbaer
- Check out the Icelandic Museum of Rock n’ Roll and the Viking World Museum, great if you want to get out of the cold!
- Go Northern Lights spotting of course! Good places include Thingvellir National Park and the area between Keflavik and the Blue Lagoon.
- Visit Stekkjarkot, a century-old fisherman’s cottage
- Cross the bridge between where the North American and European tectonic plates meet.
Best Airbnb: 2 bedroom condo in Keflavik
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 marvellous Blue Lagoon!
Best Hostel: 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 are 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 Hotel: 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 close to the small harbour 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 Keflavik international airport.
FAQs on the Best Places to Stay in Iceland
Here’s what we’re usually asked about where to stay in Iceland, the top areas and accommodation in general.
Don’t Forget Travel Insurance for Iceland
In the land of ice and snow, there is a small chance that you may be consumed by a savage land mammal or fall into a large ice hole. Make your mum happy and pretend your ready for either situation by purchasing a healthy glob of insurance. It is the only way…
ALWAYS sort out your backpacker insurance before your trip. There’s plenty to choose from in that department, but a good place to start is Safety Wing.
They offer month-to-month payments, no lock-in contracts, and require absolutely no itineraries: that’s the exact kind of insurance long-term travellers and digital nomads need.
SafetyWing is cheap, easy, and admin-free: just sign up lickety-split so you can get back to it!
Click the button below to learn more about SafetyWing’s setup or read our insider review for the full tasty scoop.
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 travellers’ breaths away.
While staying in Reykjavik is perfect, especially for budget travellers, 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!
- Check out our ultimate guide backpacking around Iceland.
- Figured out where you wanna stay? Now it’s time to pick the perfect hostel in Iceland.
- Or… maybe you want to check out some Airbnbs in Iceland instead
- Save yourself hassle and money and get an international sim card for Iceland.
- Swing by our super epic backpacking packing list to prep for your trip.
- Our in-depth Europe backpacking guide will help you plan the rest of your adventure.
