Iceland has become a must-see destination for globetrotters worldwide, thanks to its breathtaking landscapes and one-of-a-kind experiences. However, this Nordic island also has a reputation for being among the most expensive travel spots.
The good news? With some careful planning and the right resources, you can enjoy Iceland’s wonders without breaking the bank. We’re here to help you figure out where to stay in Reykjavik with modern hotels that combine comfort, convenience, and affordability, making your trip memorable and budget-friendly.
Reykjavik Neighborhoods
Reykjavik the cultural, historical, and economic heart of Iceland, will probably be the first stop on your Icelandic vacation. As the country’s capital city, it offers a wide range of accommodations, from luxurious suites to boutique hotels with unique charm. Although lodging in Reykjavik can be pricey, there are still options to suit every budget.
Reykjavik is a central location with an efficient public bus system that connects the city to nearby neighborhoods, making it simple to get around. However, if you’re on a budget or want to save money on accommodations to enjoy the city’s other attractions, choosing the best place to stay in Reykjavik can feel overwhelming.
Not sure where to stay? Reykjavik has lots of great neighborhoods to explore! To help you plan your trip to Iceland’s capital city, here are some of the best places to stay near Reykjavik
Midborg
Midborg or Miðborg is the main hotspot in Reykjavik and a prime location for visitors. This district is home to some of the city’s best stores, restaurants, bars, and attractions, making it the perfect base for immersing yourself in Reykjavik’s culture and energy. Plus, its unbeatable location and compact size mean you’ll be within walking distance of many must-see sights.
For budget-conscious travelers, Midborg still offers plenty of options. While it’s known for higher-end luxury hotels, you can find accommodations like hostels, guesthouses, and smaller hotels that provide comfort and convenience without breaking the bank. You’ll also save on transportation costs since most attractions in downtown Reykjavik are just a stroll away.
Visitors can take in the panoramic views from the iconic Hallgrimskirkja church, delve into Iceland’s Viking history at the Settlement Exhibition, or savor local delicacies at Perlan (The Pearl), which also offers amazing views of the city. The main streets of Midborg are bustling with energy, featuring cozy cafes and charming shops, so there’s always something to explore just steps from your hotel.
Keep in mind that while Midborg’s great location and vibrant atmosphere make it highly sought-after, accommodations here tend to be the most expensive in Reykjavik. However, the proximity to top attractions makes it well worth the investment, especially for those wanting to make the most of their time in Iceland’s capital.
- Sand Hotel
Laugavegur 34, 101 Reykjavík, Iceland
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Nestled in the heart of Reykjavik, this beautiful hotel combines sleek design with a welcoming atmosphere. Its spacious rooms and on-site restaurant offer a perfect blend of sophistication and comfort, making it an ideal choice for travelers looking for easy access to the city’s best attractions.
- 101 Hotel
Hverfisgata 10, 101 Reykjavík, Iceland
$$$
This boutique establishment features modern furnishings across 38 chic rooms, complete with oversized bathtubs and private balconies. Guests can enjoy a lively bar, an elegant restaurant, and a luxe spa for ultimate relaxation.
- Hotel Borg
Pósthússtræti 11, 101 Reykjavík, Iceland
$$
This Art Deco property was Iceland’s first and most-celebrated deluxe hotel. Located in the city centre, this historic building features a new on-site restaurant and sophisticated spa and exudes timeless character.
Vesturbaer
As one of the best places to stay in Reykjavik, Vesturbær strikes the perfect balance between proximity and tranquility. This charming neighborhood is close enough to downtown for convenience yet far enough to provide a peaceful retreat. Its blend of culture, nightlife, and family-friendly attractions makes it a versatile choice for all types of travelers.
Nightlife enthusiasts can enjoy a local beer at Ægisgarður, home to the iconic Viking Brewery, where the atmosphere is as spirited as the flavors. For a deeper dive into Reykjavik’s culture, visit the Living Art Museum, which showcases contemporary works by international and local artists.
Want to explore Vesturbær’s family-friendly side? Check out the Whales of Iceland museum. This immersive experience features life-size whale models, interactive displays, and educational insights into these majestic marine creatures.
- Reykjavík Marina Hotel
Mýrargata 2, 101 Reykjavík, Iceland
$$
Dreaming of a coastal getaway? The Icelandair Hotel, Reykjavík Marina, offers a stay by the city’s harbor, featuring 147 contemporary rooms, some with floor-to-ceiling glass walls overlooking the marina.
- Exeter Hotel
Tryggvagata 12, 101 Reykjavík, Iceland
$$$
The Exeter is just across from the harbor, offering rooms with incredible mountain and ocean views. With a modern design featuring metal and leather accents, the hotel is also home to the popular bakery Deig, known for its rare bagels, and Le Kock restaurant, featuring delicious Icelandic ingredients.
- Refurinn Guesthouse
Ægisgata 26, 101 Reykjavík, Iceland
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One of the best budget hotels in the area, the Refurinn Guesthouse is a charming, family-run property just a short walk from Reykjavik’s harbor, downtown shopping, and dining areas. With comfortable rooms, shared bathrooms, a fully equipped kitchen, and free WiFi, it offers budget-friendly accommodations with access to local bus links.
Hlidar
Also known as Hlíðar, Hlidar’s residential neighborhood is a popular destination for backpackers and younger travelers staying in Reykjavik, thanks to its lower priced accommodations
Aside from the lower-end accommodations, you can also find several unique activities to explore in this area, such as climbing atop the hill Oskjuhlid or visiting the Icelandic Phallological Museum, the only museum devoted to penises in the world.
If you’re wondering where to stay in Reykjavik on a budget, Hlíðar offers a variety of economical options without sacrificing convenience.
Beyond budget lodging, the area is home to attractions like Öskjuhlíð Hill, a scenic spot perfect for a hike with panoramic views of the city. During your stay, make sure to visit Perlan, a glass dome with an observation deck, a museum, and a restaurant offering unrivaled views of Reykjavik and its surroundings.
The area is also connected to downtown by public transportation, making it easy to explore Reykjavik’s top attractions, including the National Museum of Iceland and the Laugardalslaug Swimming Pool. With its proximity to cultural sites and outdoor activities, Hlíðar is an ideal base for travelers looking to experience Reykjavik without breaking the bank.
- Hotel Hilda
43X3+HGP, Bárugata, 101 Reykjavík, Iceland
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Hotel Hilda is an affordable hotel with cozy rooms and modern amenities. The hotel offers a comfortable home base conveniently located near attractions like Öskjuhlíð Hill. As one of the best Reykjavik hotels for budget travelers, it’s a peaceful retreat away from the hustle and bustle of the city center.
- Butterfly Guesthouse
Ránargata 8, 101 Reykjavík, Iceland
$
Butterfly Guesthouse offers access to key Reykjavik attractions, including Icelandic Fish and Chips, which is just a 6-minute walk away. The Guesthouse is also near cultural sites like the Reykjavik Museum of Photography, the Sun Voyager Sculpture, and the Icelandic Punk Offbeat Museum. The Guesthouse rooms feature modern furniture, soundproof windows, and private bathrooms.
- Lighthouse Apartments
Ránargata 9A, 101 Reykjavík, Iceland
$$
Planning a longer stay? Lighthouse Apartments offers luxury apartments featuring private rooms designed for comfort and style. Each apartment is well-appointed with modern amenities, including fully equipped kitchens and spacious living areas. It’s one of the best places to stay in Reykjavik, Iceland for families and groups, offering extra space to ensure a comfortable and convenient stay for everyone.
Laugardalur
Laugardalur is a peaceful, family-friendly neighborhood in Reykjavik, combining residential comfort with access to key attractions. Centrally located and connected by public transportation, Laugardalur is a great base for families or those seeking a quieter location while remaining near the city center. Just a few minutes away, you can explore Husdyragardurinn (the Reykjavik Zoo), home to Icelandic wildlife and a cozy little aquarium. Meanwhile, the Icelandic Elf School teaches visitors about elves, the Hidden People, and Icelandic myths.
Laugardalur is also home to Laugardalslaug, one of Reykjavik’s largest and most popular thermal pools, ideal for a relaxing swim or soaking in the hot tubs. The Laugardalur Park area provides plenty of green space for outdoor activities, while the nearby Reykjavik Botanical Gardens make for a tranquil escape.
- Hotel Reykjavík Grand
Sigtún 28, 105 Reykjavík, Iceland
$$
Hotel Reykjavík Grand is one of the most popular hotels in the business district—and for good reason. Known for its spacious event facilities, it boasts over 1,950 sqm of space suitable for meetings, conferences, exhibitions, and dinners. The hotel also features a restaurant, lounges, a bar, non-smoking rooms, and a fitness center.
- Hilton Reykjavik Nordica
Suðurlandsbraut 2, 108 Reykjavík, Iceland
$$$$
Hilton Reykjavik Nordica is a premium hotel that caters to luxury travelers seeking an upscale experience in one of the best locations to stay in Reykjavik. This elegant hotel includes modern amenities and exceptional service, with beautiful rooms, a full-service restaurant, an exclusive spa, and a well-equipped fitness center.
- Fosshotel Reykjavík
Þórunnartún 1, 105 Reykjavík, Iceland
$
Fosshotel Reykjavik is a stylish 16-floor hotel located near Höfði House and Laugavegur shopping street. With state-of-the-art conference facilities, upscale dining at the Haust restaurant, and a beer garden featuring local brews, this hotel guarantees a memorable visit.
If you’re in Reykjavik, where to stay isn’t the only thing you’ll need to decide on. Read our guide to learn about things to do in Reykjavik!
Types of Accommodations
Iceland is known for being a higher-end destination, and many travelers are surprised at the prices upon arrival. While you can reduce expenses by camping, cooking, or exploring free activities fully experiencing everything Iceland offers often comes with a higher price tag.
However, if you’re wondering where to stay near Reykjavik on a budget, there are still plenty of affordable options. To keep costs down consider renting a tent, booking a camper van or staying in hostels
Hotels
While there are plenty of upscale hotels in Reykjavik, you shouldn’t expect five-star accommodations that you may find in a larger city. A comfortable hotel room downtown typically costs a few hundred dollars per night, with a few exceptions offering more affordable rates or premium experiences.
Hostels
Hostels are a great option for those seeking a more budget-friendly alternative to the expensive hotels found in the city center. Many hostels include additional perks like tours Many hostels have extras such as trips to see the Aurora Borealis, on-site restaurants, and self-service kitchens – all of which can make your trip more wallet-friendly.
Younger travelers looking to party and explore the nightlife can opt for youth hostels. Conversely, those seeking a quieter stay can choose boutique Reykjavik hostels a serene retreat after a day of exploration.
Guesthouses
With the rise of peer-to-peer couch-sharing services and vacation cabins in Reykjavik, you can explore more affordable alternatives to expensive hotels.
However, don’t expect huge savings, as many popular spots may cost as much as—or more than—a hotel room. It’s also important to plan ahead, as even the most budget-friendly guesthouses can be booked several months in advance.
Campsites (Laugardalur Park)
One of the most cost-effective accommodations and best alternativesto staying at a hotel (though we may be biased here) is camping. These beautiful Icelandic campsites offer some of the best places to stay near Reykjavik. For example, Laugardalur Park is located a 20-minute walk from downtown Reykjavik, this campsite is unmatched in its convenient amenities, including parking, utilities for campervans, toilets, washing machines, internet access, catering facilities, and 24-hour security.
Situated next to the Laugardalur swimming pool and recreational area, it’s also close to family-friendly attractions like the Laugardalur Petting Zoo and Family Park, making it an ideal choice for families wondering where to stay in Reykjavik with children.
Plan Your Next Adventure with Rent.is
Ready to plan your next adventure? A camper rental in Iceland is the go-to option if you’re looking for flexibility in where to stay in Reykjavik while exploring Iceland at your own pace. With a camper van, you can enjoy the country’s most beautiful views while taking your base camp with you as you travel.
Contact us to find the best campervan for your needs. We’re proud to offer top-notch accommodations for your next great adventure.
