The Best Cheap Hotels in Iceland

Laxá Hótel offers starkly beautiful vistas at surprisingly low prices
Laxá Hótel offers starkly beautiful vistas at surprisingly low prices | Courtesy of Laxá Hótel / Expedia

In-house saunas and steam rooms, cooking glasses on tap and everything from geysers to geothermal pools on the doorstep – welcome to the notoriously expensive island’s most surprisingly affordable hotels.

Iceland, the Nordic island nation in the North Atlantic, is all about the great outdoors: soaking in geothermal lagoons, traversing lava fields like mossy moonscapes, driving coast roads to obsidian black beaches and epic waterfalls. It’s also a notoriously expensive destination, so bagging budget hotels where you can will help channel your funds towards exploring in style. Try one of these characterful, comfy stays for a balance of stylish Icelandic hospitality and comfortable room rates.

Center Hotel Arnarhvoll

Business Hotel, Chain Hotel
4.4/5 (999 Reviews)
| Courtesy of Center Hotel Arnarholl
From $219 Per night per room

With a cracking location overlooking Reykjavik’s tranquil harbour (jumping-off point for whale-watching tours), this smart budget hotel attracts locals, who love brunching on smoked salmon and shrimp cocktail at its eighth-floor Sky Bar. There are slick monochromatic rooms, too, with slate-grey walls offset by modern watercolours and lime-green accents. The open-top roof and secret-feeling spa, reflecting Iceland’s moody palette of greys and blacks, add layers of luxury to this basic but buzzy stay.

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Hotel Berg, Keflavik

Budget Hotel, Airport Hotel, Hotel
4.6/5 (764 Reviews)
Hotel Berg, Keflavik
Courtesy of Hotel Berg
From $151 Per night per room

Snuggly herringbone throws and ice-blue scatter cushions cosy up minimalist Nordic design at this glam but affordable base. From its striking shed-like exterior to its steaming, heated rooftop pool, it’s a truly grand design – with nifty free drop-off service to the airport helping to save even more cash on your Icelandic break. The beautiful marina-facing restaurant is another huge draw for style-hunters and foodies, serving flower-strewn, colourfully-sauced takes on stone crab and salt cod. You’ll be unable to resist taking a few snaps.

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Hotel Ísland

Spa Hotel
4/5 (839 Reviews)
Courtesy of Hotel Ísland / Expedia
From $137 Per night per room
Slightly out of the city centre, near Reykjavik’s sporty Laugardalur district, this modern hotel is all about its spa, which tempts pamper-loving fans with its black mosaic hot tubs, scented sauna and mood lighting that mimics the Aurora Borealis. There’s also a hip New Nordic restaurant, all red bricks and low-hanging pendant lights, serving up roasted mushroom risotto and bourbon-slicked ribeye steaks to a well-heeled bunch. In terms of local living, head off walking around Laugardalur’s trails and don’t miss a dip in the city’s largest geothermal pool.
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Hotel Cabin

Budget Hotel, Hotel
3.7/5 (942 Reviews)
Hotel Cabin, Borgartún
Courtesy of Hotel Cabin
From $116 Per night per room

Also between the city centre and Laugardalur, this simple base does snug rooms in tasteful tones of white, pine and chocolate. Triple rooms with an extra single are top value for families whilst a pared-back downstairs bar with plenty of sofa seating is a great impromptu workspace for digital nomads. Be aware that the cheapest rooms lack a window, so double check when booking. Breakfast is included and you’re walkable to the city centre – ideal for shoestring travellers who want to get out on the town.

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Hótel Örk

Eco Hotel, Hotel
Courtesy of Hótel Örk / Expedia

Rooms go from snug to stylish at this rural hotel, in the quaint geothermal town of Hveragerdi. Just southeast of capital Reykjavik, close to the Reykjadalur Valley’s hot-spring trail, it’s a great stop on a road trip out towards Vatnajökull National Park – not least because the hotel runs its own selection of tours including ice climbing, glacier hikes and scuba diving. With a huge, snaking waterslide and vast pool out front, this is a great choice for families during summertime.

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Hótel Bifröst

Budget Hotel
Hótel Bifröst
Courtesy of Hotel Bifrost

A true country retreat in the wilds of Borgarfjordur in western Iceland, Bifrost is just off the Route 1 highway – the circular ring road that loops around the entire island – making it a haven for road-trippers. A nine-hole golf course and sheepskin-draped lounge with a fireplace pile on a little luxury, while rooms are kept basic with comfy divan beds, minimalist furniture and verdant views. Its veggie-friendly restaurant is also a lifesaver in these remote parts, refuelling you with salt-baked beetroot and sweet potato tacos before you hit the road.

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Laxá Hótel

Budget Hotel
Courtesy of Laxá Hótel / Expedia

On the southern shores of the gloriously biodiverse Lake Mývatn, this boxy, remote lodge has hiking trails branching off in every direction. Filling up on its hearty hot breakfast of waffles, eggs, bacon and beans, you’ll dash off to explore lava fields, spot rare birds along its wetlands, peek into geothermal caves and soak in the local geothermal ‘Nature Baths’. By night you’re cosseted in crisp, minimalist views – some with astonishing lake views – with a garden and terrace on hand for sunnier days.

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Budget Hotel
4.5/5 (998 Reviews)
| Courtesy of Fosshotel Reykjavik
From $134 Per night per room

In Reykjavik’s well-connected business district, this affordable hotel’s aesthetic is as razor-sharp as its silvery exterior, which glints like an anvil against the broad Icelandic skies. Single rooms are a steal for solo travellers whilst the quirky decor (living walls, concrete pillars, huge copper-bauble light fixtures). A surprisingly glam restaurant showcases the island’s farm-to-table cuisine with great flair, keeping the simplicity to modern rooms furnished with tweedy throws and plum or teal accent chairs.

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Litli Geysir Hotel

Budget Hotel, Hotel
Map View
Courtesy of Litli Geysir Hotel / Expedia

Bang opposite the Great Geysir, one of Iceland’s top sights, this sweet rural lodge is a hit with foodies thanks to a choice of five restaurants, each with a distinct vibe and aesthetic. The must-do is Hot Spring Taste, a group experience where the hotel chef shows you a traditional baking technique for rye bread, using the naturally heated geothermal earth. This bolthole’s nifty proximity to the geyser site also means you can ditch the crowds, arriving early or staying late to get the most breathing space.

Hotel Laxnes

Budget Hotel
4.2/5 (535 Reviews)
Courtesy of Hotel Laxnes / Expedia
From $133 Per night per room

A base for adventurers with a strong sense of style, this Mosfellsbaer lodge, just northeast of Reykjavik, sits near a network of beautiful hiking trails as well as a horse farm where you can saddle up to explore on diminutive Icelandic ponies. Bag a room with heady mountain views for maximum serenity; all have a light, bright contemporary style with raw woods and powder-blue bedding. It’s not just a crash pad, either: the owners have curated a selection of tours and outings including volcano climbs and whale-watching trips and can tackle all your holiday logistics from car hire to hot-tub sessions.

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  • Hótel Laugarbakki

    Budget Hotel, Hotel
    4.5/5 (195 Reviews)
    Hótel Laugarbakki
    Courtesy of Hotel Laugarbakki
    From $166 Per night per room

    Close to the hot springs and seal colonies of the Vatnsnes Peninsula, this light-filled, minimalist hotel is a calm place to recline and refuel after taking in the region’s vast landscapes. Tuck into wholesome grilled fish with caper butter or wild-mushroom soup, then head out with a guide to discover the area’s folklore, full of Viking heroes and magical elves. Family and single rooms adapt to your group size and price point, making it an excellent value journey-breaker.

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    Icelandair Hotel Reykjavik Marina

    4.4/5 (999 Reviews)
    King room at Icelandair Hotel Reykjavik Marina
    Courtesy of Icelandair Hotel Reykjavík Marina /
    From $175 Per night per room

    Inspired by the nation’s nautical history and facing Reykjavik’s charming marina, this light-hearted hotel has rooms jazzed up by map murals, sailor’s-knot prints and life rings. Downstairs, a bright bistro hosts jazz nights, kids’ movies and afternoon-long brunches. The industrial-look gym, the Boiler Room, is a quirky place to lift weights whilst those concerned with their travel footprint will be pleased to learn that this is a certified green hotel that’s hot on recycling, local products and slow food.

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    Hotel Klettur

    Budget Hotel
    4.2/5 (571 Reviews)
    Courtesy of Hotel Klettur / Expedia
    From $152 Per night per room

    Close to Reykjavik’s sights and surrounded by hip coffee bars and homewares shops, Klettur has pine-clad bedrooms, a stylish bar and an impressive games room. Attracting adventurous types, there is a tasty (and complimentary) continental breakfast where you can try local skyr yoghurt. At the dedicated tour desk, you can ask an expert for advice on your next day trip. Set out on foot to see the stunning Hallgrimskirkja church and the city’s art museum.

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    Alda Hotel Reykjavik

    4.7/5 (992 Reviews)
    Courtesy of Alda Hotel Reykjavik
    From $190 Per night per room

    Travellers looking to load up on designer Icelandic knick-knacks should consider this boutique base on Reykjavik’s main shopping street, Laugavegur. It’s a peaceful part of town, away from the city’s throbbing nightlife, but walking distance from the central sights and breezy waterfront. Rooms come in moody shades of slate, mushroom and gold, with pampering L’Occitane products. Really though, it’s the communal facilities that wow guests: an outdoor hot tub and sauna, a hip brasserie and even a barbershop. As an extra perk, you get a 4G-loaded smartphone to help you explore the town.

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    201 Hotel

    Budget Hotel
    4.3/5 (264 Reviews)
    First Hotel Reykjavik
    Courtesy of First Hotel Reykjavik /
    From $130 Per night per room

    If you’re happy to stay out of town after a brief peek into the capital, this Kopavogur base has minimalist-chic rooms for a steal, with free wifi and breakfast thrown in. Downstairs, cheery velvet sofas in burgundy, sage and mustard trim a relaxed lobby lounge, whilst the 24-hour, self-service check-in means you can arrive and depart without any waiting around. Free parking makes it a favourite with road trippers off to tackle Route 1.

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    Hotel South Coast

    Luxury, Spa Hotel
    4.7/5 (66 Reviews)
    Screenshot 2021-06-16 at 16.08.47
    Courtesy of Hotel South Coast / Expedia
    From $162 Per night per room

    This hotel sits in the southern town of Selfoss, gateway to some of the island’s most spectacular waterfalls, rocketing geysers and jet-black beaches. With a fine-dining restaurant and striking, neon-lit spa on hand, it’s a pampering base for hikers and cyclists. Slick rooms reflect the natural palette of the region, in volcanic hues and tree-trunk browns. Book group tours departing from Selfoss, then return to lounge in the luxurious sauna and hot tub.

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    Camille Buckley contributed additional reporting to this article.

    These recommendations were updated on June 17, 2021 to keep your travel plans fresh.

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