The Best Budget-Friendly Hotels to Book in Iceland

There are many places to explore in Iceland, such as the town of Blönduós
There are many places to explore in Iceland, such as the town of Blönduós | © imageBROKER / Alamy Stock Photo
Nammie Matthews


Budget accommodation in Iceland opens up the natural wonders of the Land of Fire and Ice to price-conscious travellers.

Soaring mountains and bubbling volcanoes, dominating glaciers and gushing waterfalls – all illuminated by the Northern Lights at night – make Iceland a must-visit destination for lovers of the outdoors. But luxury experiences needn’t come with a premium price tag, and there are a few cheaper hotels in Reykjavík and beyond that make visits to the Blue Lagoon, Golden Circle and endless natural wonders less of a burden on the bank balance.

1. Hotel Odinsve


A stylish dining room at Hotel Odinsve with tables, chairs, a bar area and potted plants
Courtesy of Hotel Odinsve / Expedia

Boutique charm awaits a five-minute walk from the shops of Laugavegur street in Reykjavík. At Hotel Odinsve, service comes with a personal touch, and everything is designed with your comfort in mind. Enjoy a warm, welcoming environment in one of the 50 rooms, which include singles, doubles and family suites. The in-house Snaps Restaurant is also one of the finest in town, serving French cuisine to locals and visitors.

2. Apotek Hotel by Keahotels

Boutique Hotel

A stylish room at Apotek Hotel by Keahotels, with cream reclining seats
Courtesy of Apotek Hotel by Keahotels / Expedia

Located in one of the oldest buildings in Reykjavík, Apotek Hotel, named for the building’s former life as an apothecary, brings vitality to this magnificent 100-year-old property. The interior exudes cool, with a monochrome colour palette and parquet flooring, plus a Nespresso machine in every room. As well as a cosy place to call home for a few days, it offers a great base for exploring the shopping, entertainment and culture district of the Icelandic capital.

3. Hotel Klettur

Budget Hotel

A room with a pool table, a wooden floor and lights at Hótel Klettur
Courtesy of Hótel Klettur / Expedia

With a private garage available to guests, this budget Iceland hotel is a great base for travellers looking to explore beyond Reykjavík; Thingvellir National Park in the Golden Circle is a 45-minute drive away. The family-friendly hotel is based in the heart of the capital, with locally adored cafe Reykjavík Roasters opposite. End a day of discovery in the games room, where you can take a photo with the Northern Lights courtesy of a selfie wall.

4. Hotel Fron

Budget Hotel

A bedroom with a wooden floor, a bed and a kitchen area at Hotel Fron
Courtesy of Hotel Fron / Expedia

Feel at home in the simple-yet-cosy Hotel Frón, located on Laugavegur, the main shopping street in Reykjavík. First-class service is a top priority at the hotel, where the staff are committed to making sure your visit to Iceland is the best it can be – grill them for the inside scoop on the best days to visit the geysers, glaciers and geothermal spas. Elegantly styled rooms range from single and doubles to studios and larger apartments.

5. R13 – A Townhouse Hotel

Budget Hotel

A stylish bedroom with black walls, windows, a bed with a yellow blanket and white duvet at R13 – A Townhouse Hotel
Courtesy of R13 – A Townhouse Hotel / Expedia

Super-chic and modern, with all the conveniences you need for a fuss-free holiday in Reykjavík, R13 offers a comfortable base just 2km (1.2mi) from the city centre. Each room is fitted with a sleek kitchenette, including an oven and a dishwasher, making it a perfect choice if you want to save on meals out. Street parking makes the Townhouse Hotel an ideal springboard for exploring the rural wonders of Iceland, too.

6. Hotel Smàri

Budget Hotel

A bedroom with a TV, a bed, an orange carpet, a wooden desk and a wooden headboard at Hotel Smàri
Courtesy of Hotel Smàri / Expedia

Just 300m (985ft) from Smáralind, the largest shopping mall in Iceland, Hótel Smári offers well-furnished rooms for business and leisure travellers seeking a comfortable stay. A hot breakfast is served each morning, while nearby shops and restaurants will ensure you’re kept entertained and fed throughout your trip. The hotel is a 10-minute drive from Reykjavík and just half an hour from the geothermal bathing at the Blue Lagoon.

7. Hotel Laxnes

Budget Hotel

A stylish room with a pool table, wooden floor, rug and seating at Hotel Laxnes
Courtesy of Hotel Laxnes / Expedia

Unwind in a hot tub beneath the Northern Lights at Hotel Laxnes, where personalised service ensures you feel welcome. Most of the 26 rooms face the mountains, perfectly positioned for views of the aurora borealis on fortuitous nights. Reykjavík is around a 20-minute bus ride away, though there’s plenty to do nearby – take a hike to the Álafoss waterfall or go riding at Laxnes Horse Farm.

8. Hotel Kjarnalundur


Exterior of Hotel Kjarnalundur surrounded by trees and patches of snow
Courtesy of Hotel Kjarnalundur / Expedia

For a wellbeing-centred retreat just outside of Akureyri in northern Iceland, look no further than Hotel Kjarnalundur. You have free access to the hotel hot tub and infrared sauna, with the trails and outdoor activities (volleyball and mountain biking) in Kjarnaskógur forest on your doorstep. You can also dine with a gorgeous view across the Eyjafjörður fjord at the second-floor restaurant.

9. Hotel Vellir

Budget Hotel

A large, modern bedroom with two beds, grey sofas and a wooden floor at Hotel Vellir
Courtesy of Hotel Vellir / Expedia

Perfectly situated for wandering among nature, Hotel Vellir offers a tranquil escape from the city lights around a 20-minute drive from Reykjavík, with hiking trails in stumbling distance. Streamlined-yet-comfortable rooms are accompanied by free parking and a hot breakfast each morning, and there’s a small bistro serving bar food in the evenings. Nearby, there’s the stunning Keilir Golf Club, which overlooks the Atlantic Ocean.

Fancy a stylish stay in Iceland? Check out our pick of the best boutique hotels in Iceland, or for more affordable options in the Land of Fire and Ice, see the best cheap hotels in Iceland, all bookable with Culture Trip.

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