Best Budget Accommodations in Iceland!

Welcome to your “Best Budget Accommodations in Iceland!”  Since it’s a rock pretty much in the middle of nowhere, Iceland is quite an expensive country.  Which is why I want to save you some money on hotels!  And the great thing?  You won’t have to sacrifice quality.  I’m going to show you some charming bed & breakfasts, spacious hostels, & cozy hotels all over Iceland ~ that have character & won’t break your budget! 

In this post, we’ll travel around Iceland, hitting all the major sites.  In each spot, I’ll give you my top budget hotel(s), to make your Iceland planning quicker & easier on your wallet.  We’ll start in Keflavik, by the International Airport, then head south to the super popular Blue Lagoon.  From there, we’ll head towards the Golden Circle & South Iceland, & a town called Vik.  Then we’ll fly up north, & I’ll introduce you to a great hostel in Akureyri that’s great for all ages!  Finally, we’ll head back down south & hit Iceland’s quirky, must-see capital, Reykjavik

What does “budget accommodation” mean in Iceland?  It means that I’m roughly trying to keep hotel prices around $55/night ~ which in Iceland is a steal.  In some places, this isn’t possible: so I’m giving the next best option.  

Best Budget Accommodations in Iceland, Girl Who Travels the World

Ready to go to Iceland & see sights like this & save money on hotels?! Let’s go! (This shot taken on the tip of the Keflavik Peninsula)

Best Budget Accommodations in Iceland

1. Keflavik (near International Airport)

When flying into Iceland, you’ll almost 100% be flying into Keflavik International Airport.  Meaning, at the beginning or end of your trip, you’ll likely be staying a night or two here.  And I’d recommend it.  1) It will make your flight less stressful, & 2) It’s a quaint, charming town with cute restaurants & bars. 

My top budget hotel choice for Keflavik is the Nupan Deluxe Guesthouse.  The guesthouse is family-run, & is so charming & tidy (they do a fantastic job keeping it sparkling clean), & you can get a single, double, or triple room ($52-130+).  If you’re traveling solo, this is a great place to grab a single room & save some money!  Single rooms here aren’t huge (rooms in Iceland typically aren’t), but the great thing about Nupan is that there are plenty of cute common areas to relax, chat, grab (free) coffee, or read in.  And they have an outdoor hot tub where you can watch the Northern Lights!  It’s also walk-able to Keflavik’s main street & plenty of restaurants.

Best Budget Accommodations in Iceland, Nupan Guesthouse, Keflavik

Hot tub? Northern Lights? Check & check, at the Nupan Deluxe Guesthouse, in Keflavik.

Another Darling Guesthouse in Keflavik: BGB Guesthouse.  Rooms are stylish & simply decorated, clean & highly-rated.  A great value for your money & in a central location!

Nearby, More Expensive Option = The Lighthouse Inn, located in Gardur (about 7 miles from Keflavik).  Why stay here?  Not only is it a darling, highly-rated hotel, & reasonably priced ($117+) ~ but Gardur is also where the Northern Lights are spotted…A LOT!!  Many “Northern Lights Tours” starting in Reykjavik actually end up here, in Gardur ~ so save yourself some money on a tour, & stay here instead!

Search all hotels in Keflavik here

Best Budget Accommodations in Iceland, BGB Guesthouse, Keflavik

Cute, clean, stylish, & spacious. And $55/night. BGB Guesthouse, Keflavik.

2. Grindavik (near the Blue Lagoon)

The Blue Lagoon is one of the top destinations in Iceland ~ & with good reason: it’s absolutely stunning, & a perfect place to warm up after Iceland’s often brutally cold weather.  And one of the best budget accommodations in Iceland just happens to be located in a town ten minutes from the Blue Lagoon: Grindavik

The Lagafell Guesthouse ($54+) is adorable, charming, & run by a lovely family (we ended up chatting with the delightful owner for over an hour)!  Rooms are serene & white, with colorful accents ~ it feels very peaceful & warm after being out in the cold.  I stayed here both solo & with friends; they have single, double, & triple rooms.  On our last night here, we caught the Northern Lights, about five minutes away from Lagafell Guesthouse! 

Best Budget Accommodations in Iceland, Lagafell Guesthouse, Grindavik

I stayed here solo & with two friends. Both times, our rooms were charming & we even saw the Northern Lights here! Lagafell Guesthouse, Grindavik.

Other Budget-Friendly Options in Grindavik: The Mar Guesthouse in Grindavik isn’t quite as charming as Lagafell, but it will get the job done for a night or two. 

Search all Grindavik hotels here

Best Budget Accommodations in Iceland!

3. Selfoss (near the Golden Circle)  

The Golden Circle is one of the most popular drives in Iceland ~ & Selfoss is a good place to base yourself if you’re making the drive (Reykjavik is about two hours away, making for quite a long day).  It’s difficult to find budget accommodations out here, but the Lambastadir Guesthouse ($104+), located just outside of town, is a quaint & cozy option that won’t break the bank.  The guesthouse is located in the countryside ~ which means you’ll have a much better chance of seeing the Northern Lights here than in town (less light pollution)!  Owners are charming, & there’s a hot tub & sauna to relax in, plus free breakfast & Wi-Fi.  Selfoss is about four miles away.

Search all Selfoss hotels here.  

Best Budget Accommodations in Iceland, Lambastadir, Selfoss

Enjoy the countryside, a hot tub, & the Northern Lights at Lambastadir Guesthouse in Selfoss.

4. Vik (Southern Iceland, by Skogafoss Waterfall & Jokulsarlon Lagoon)

We tried & tried to find budget accommodations in Vik ~ but the best we could do was around $100/night, at Hotel Katla, just outside of Vik.  There aren’t too many hotels in Vik, but there is plenty of great sight-seeing in the area.  Hotel Katla isn’t much to write home about: rooms are small & old-fashioned, log cabin-ish, but there is an outdoor hot tub & large restaurant & bar attached to the hotel.  

For a Fancier Option in Vik: Try the Icleandair Hotel Vik ($170+).  It’s much more chic than Hotel Katla, with beautifully-appointed rooms & views.  Common areas are gorgeous, decorated in neutral colors & light blues.  If you’re going to spend money in Vik, it might as well be at a place that’s stylish.  Icelandair is an upscale hotel chain, & they also have hotels in Reykjavik, Selfoss, & Keflavik.

Search all Vik hotels here

Best Budget Accommodations in Iceland, Icelandair, Vik

If you’re going to spend money in Vik, you may as well spend it in style. Iceland Air Hotel, Vik.

Best Budget Accommodations in Iceland!

5. Akureyri (Northern Iceland, near Godafoss & Detifoss Waterfalls)

You’ll find cheaper options once you head up north (it’s a little less popular & slightly less touristy), & it has one of my absolute favorite, best budget accommodations in Iceland: the Akureyri Backpacker’s Hostel ($22+).  This place is a FIND!!  It was one of the largest rooms I had in Iceland (a 4-person, female dorm), & I had it to myself for three nights!  There’s an adorable restaurant & cafe downstairs that’s great to work or hang out in (with great food!).  Showers are clean & located downstairs in the basement, but each floor has large bathrooms with sinks/mirrors/toilets.  All ages were staying at this hostel ~ I roomed with a Japanese lady in her thirties. 

Best Budget Accommodations in Iceland, Akureyri Backpackers

This cozy bar & a good pint await you in Northern Iceland, at Akureyri Backpackers Hostel. $22+/night!

Akureyri was probably my favorite town in Iceland ~ it’s charming, scenic, & filled with great restaurants, cute coffee shops, & bars.  It’s a great place to spend a few days. 

Just Can’t Do a Hostel?  I get it.  Try the (un-pronounceable) Skjaldarvik Guest House ($70+).  It’s charming, stylish, & highly-rated ~ another great base for exploring all the amazing sites in Northern Iceland.

Search all hotels in Akureyri here

6. Reykjavik (Iceland’s capital & largest city)

No trip to Iceland is complete without a stop in Reykjavik, the nation’s capital.  Luckily, we had hotel points ~ so we stayed in some of Reykjavik’s most luxurious accommodations: the Hilton Reykjavik & Radisson Blu Saga.  But prior to discovering we had points, we researched & found several great budget accommodations for Reykjavik, including some highly recommended by friends. 

The most highly-rated (even raved about) budget accommodation in Reykjavik was Kex Hostel ($30-118+).  Click on the link to check out pictures of Kex ~ it’s sooo chic & cute, you’ll think you’re at a boutique hotel.  And the cool thing is you can choose to be in either a dorm or a private room.  If there are several people in your party & you want more space, a private room is a great option.  Kex has a great vibe, a happening bar, & a near-perfect location just off Laugavegur Street ~ the main drag in town.  You may have so much fun at Kex though, that you won’t even want to leave…

Best Budget Accommodations In Iceland, Kex Hostel, Reykjavik

Is this a darling hotel? Nope. It’s Kex Hostel in Reykjavik, Iceland.

Best Budget Accommodations in Iceland, Kex Hostel

One of the best budget accommodations in Iceland: Kex Hostel, Reykjavik. Starting at $35/night.

Other Budget-Friendly Guesthouse Options in Reykjavik: The Loft Hostel ($56+).  Located directly on Laugavegur Street (which makes it a little noisier than Kex), this hostel is stylish with adorable common areas & a gorgeous rooftop terrace.  Rooms are clean, spacious, & colorful ~ & this hostel, like Kex, is also highly-rated.

Search all Reykjavik hotels here

Best Budget Accommodations in Iceland, Loft Hostel

Rooftop terrace at Loft Hostel, In Reykjavik.

 

Best Budget Accommodations in Iceland!

I hope you’ve enjoyed this guided tour of the best budget accommodations in Iceland!  Hopefully it saves you some leg-work & some money ~ money you can spend on fun Icelandic adventures instead!  Let me know how it goes for you in the comments below.

xoxo Noelia 

Read Next: Top 5 Best Waterfalls in Iceland!

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Noelle Bertram is a restaurant owner, former fitness coach, Huffington Post writer, & all-around entrepreneur who travels full-time now & writes all about it! Catch up with her on Instagram or @ her website about being the ultimate, fearless travel girl: GirlWhoTravelstheWorld.com.
Why I Use World Nomads Travel Insurance

Whenever I travel ~ especially if I’m traveling solo, I always get travel insurance.  It gives me the peace of mind to go out and have all kinds of adventures, because I know someone’s got my back.  Who do I use? World Nomads. They cover you whether you’re sky-diving, spelunking, or volcano-boarding in Nicaragua: they’re not your average insurance company.  Read more about travel insurance here.

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