Where to Stay in Iceland: A guide to the best locations and accommodation types

Iceland’s stunning natural attractions, including the Northern Lights, glaciers, and volcanic landscapes, are scattered throughout its countryside. Despite its relatively small population, Iceland offers a variety of places to stay, from its capital, Reykjavík, to remote fishing villages surrounded by dramatic scenery. Whether you’re looking for a city break, wildlife encounters, or a base to explore the natural wonders, there’s a place in Iceland for you.

When planning a trip to Iceland, finding the right accommodation and deciding where to stay can make all the difference. From city hotels to remote guesthouses and unique campervan experiences, each type offers its own set of pros and cons.

Having stayed in a variety of these options during my travels, I’ve found that understanding what each offers and how they fit into your itinerary is key to a smooth, enjoyable stay. Here’s a breakdown of the main types of accommodation available in Iceland, to help you decide which is right for your trip.

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Where to stay at a glance

• Best for a city break: Reykjavík
• Best for sightseeing: Vík
• Best for the Northern Lights: Myvatn
• Best for whale watching: Húsavík
• Best for birdwatching: Látrabjarg
• Best for hiking: Ísafjörður/Hornstrandir
• Best for foodies: Höfn
• Best for campervan adventures: All over Iceland
• Best for camping: Þórsmörk

Best places to stay in Iceland for different types of travel

Best for a City Break: Reykjavík

Reykjavík, Iceland’s capital, is the hub for culture and modern life. With its impressive architecture and attractions like the Hallgrimskirkja church and Harpa Concert Hall, the city combines modern charm with stunning coastal scenery. Reykjavík is ideal for those looking for museums, galleries, and culinary experiences, and it also serves as a base for day trips to sites like the Golden Circle or waterfalls like Seljalandsfoss.
Stay at: The Reykjavík Edition in a central location for easy access to the city’s highlights.

Best for Sightseeing: Vík

Vík, on the south coast, is perfectly located for exploring Iceland’s most iconic natural sites. Reynisfjara Black Sand Beach, Dyrhólaey, and several impressive waterfalls are all within a short drive. With its proximity to Skaftafell National Park and glaciers, Vík makes a fantastic base for sightseeing.
Stay at: Hótel Kría, just a short walk from the beach.

Best for the Northern Lights: Myvatn

Myvatn, in northern Iceland, is known for its dark, clear skies during the winter months, making it one of the top spots to witness the Northern Lights. Beyond the lights, Myvatn boasts geothermal landscapes and Lake Myvatn, a stunning setting for photography.
Stay at: Hotel Láxa or Vogafjós Farm Resort both offer scenic views and cosy stays.

Best for Birdwatching: Látrabjarg Cliffs

Látrabjarg, located in the Westfjords, is a haven for birdwatchers, particularly during the summer months. It is one of Europe’s largest bird cliffs and is home to puffins, razorbills, guillemots, and fulmars. The cliffs provide a dramatic backdrop for bird photography, and visitors can get up close to the nesting puffins. The area is also known for its remote beauty, making it a peaceful retreat for nature lovers.
Stay at: Hotel Latrabjarg, which is just a short drive from the cliffs, or consider camping nearby at Breiðavík við Látrabjarg for a proper adventure.

Best for Whale Watching: Húsavík

Húsavík, known as the whale-watching capital of Iceland, offers frequent sightings of various species, from minke to humpback whales. Summer is the prime season for whale-watching tours. The town also provides opportunities for puffin watching and has a charming small-town vibe.
Stay at: Bjarnabúð apartment or Fosshotel Húsavík in the town center, close to whale-watching tours.

Best for Foodies: Höfn

Höfn, on Iceland’s southeast coast, is a seafood lover’s dream, famous for its lobster. The town’s annual lobster festival is a highlight for foodies. In addition to indulging in fresh seafood, Höfn is also a convenient base for exploring the Vatnajökull Glacier and nearby ice caves.
Stay at: Guesthouse Dyngja in town, or Haukaberg House for a quieter retreat with mountain views.

Best for Hiking: Ísafjörður/Hornstrandir

Isafjordur, located in the Westfjords, is a gateway to some of Iceland’s most rugged and remote hiking trails. The nearby Hornstrandir Nature Reserve offers solitude, wildlife encounters, and dramatic coastal landscapes.
Stay at: Tangs in Ísafjörður, a family-run cottage in one of the oldest houses in the town, or camp in Hornstrandir for a wilderness adventure.

Tips for choosing where to stay in Iceland

• Book Early for Popular Areas: Especially during the summer months and around the Northern Lights season, accommodation in popular areas like Reykjavik, Vík, and around Lake Mývatn can fill up quickly. If you plan to stay in more remote locations, such as the Westfjords or the Highlands, booking several months in advance is recommended to secure a spot.
• Consider Proximity to Attractions: When choosing where to stay, think about how close the accommodation is to the attractions you want to visit. Staying in places like Vík or Höfn can reduce driving time if you’re focusing on South Coast sights while staying in Mývatn is ideal for Northern Lights chasers. Centralised locations allow for easier day trips.
• Check for Amenities, Especially in Remote Areas: Some accommodations in Iceland’s remote regions may have limited amenities. Make sure to check what’s included as Wi-Fi, heating and kitchen facilities can vary greatly. If you’re planning to camp or use a campervan find out in advance if your chosen campsite has facilities like hot showers and electricity.

Accommodation types in Iceland: Pros and Cons

Hotels

Hotels in Iceland are typically found in larger towns and popular tourist hubs like Reykjavík, Vík, and Akureyri. They offer comfort and convenience, often featuring amenities such as private bathrooms, breakfast and in-room Wi-Fi making them ideal for travellers seeking ease and relaxation.

While some hotels can be on the pricier side, especially in Reykjavík, they provide a stress-free experience with everything you need on hand. However, if you’re planning to explore more remote areas, hotels may be harder to come by, so early booking is essential.

Pros: Hotels offer modern amenities and comfort making them great for travellers who are looking for convenience and full services. Many come with stunning views and in-house restaurants.
Cons: More expensive than other options and can be limited in remote areas.
Best for: City travellers, couples, and those who prefer luxury or convenience.

Guesthouses

Guesthouses are a popular choice across Iceland, particularly in rural areas where larger hotels are scarce.

These are family-run offering a warm, personal touch and often feature shared facilities like kitchens and bathrooms.

Staying in a guesthouse provides a more authentic, local experience, and many are located in scenic areas perfect for nature lovers. While the shared amenities might not appeal to everyone, the cosy atmosphere and often lower cost make them a great option for budget-conscious travellers.

Pros: These are a step down in price from hotels but still provide cosy accommodations. Often family-run, guesthouses offer a more personal experience.
Cons: Limited facilities and shared bathrooms in some places.
Best for: Travellers seeking a more authentic, local experience.

Hostels

Iceland’s hostels are perfect for budget travellers or those looking to meet other like-minded adventurers.

Hostels are found in most towns and some rural areas and have dormitories or private rooms with shared bathrooms.

Many come with well-equipped kitchens, which can help save on Iceland’s notoriously high dining costs.

While hostels may lack the privacy and luxury of hotels or guesthouses, they are a fantastic way to stretch your budget while staying in prime locations near major attractions.

Pros: Hostels are the most budget-friendly option for backpackers and solo travellers. They also encourage socialising, with common areas for meeting fellow adventurers.
Cons: Shared rooms and basic amenities.
Best for: Budget-conscious travellers and solo explorers.

Cabins and cottages

Cabins and cottages offer a peaceful retreat, often set in Iceland’s most picturesque landscapes. These self-contained units are ideal for couples or small groups wanting a private stay with more space to relax.

Many come with their own kitchens and outdoor spaces, perfect for self-catering and enjoying the natural surroundings.

While cabins can be more expensive, especially those near the Golden Circle or Myvatn, they offer a unique opportunity to experience Iceland’s beauty away from the crowds.

Pros: Perfect for nature lovers these offer privacy in stunning surroundings. They are often located near national parks or scenic landscapes. Many come with self-catering facilities, making them ideal for longer stays.
Cons: Remote locations can mean fewer nearby amenities and higher transportation costs.
Best for: Families, photographers and those looking for peaceful retreats.

Farm Stays

For a more immersive experience in Iceland’s countryside, farm stays allow you to connect with rural life.

These working farms often offer accommodation in cottages or guest rooms, with opportunities to meet animals, enjoy farm-fresh food, and experience the tranquillity of Iceland’s remote landscapes.

They’re ideal if you want to slow down and enjoy a peaceful retreat while still being close to nature. The main downside is the remote location, so a car is often essential, but the calm surroundings more than make up for it.

Pros: Farm stays offer an immersive experience where you can see how Icelandic farms operate and in some cases participate in farm activities. They are often located in scenic areas and near nature.
Cons: Limited access to other services and remote locations.
Best for: Nature enthusiasts and families seeking unique stays.

Campervans

Travelling by campervan offers the ultimate freedom to explore Iceland at your own pace. With campsites scattered across the country, you can park up and wake up to incredible views while having the flexibility to move when you please.

Campervans come equipped with basic sleeping, cooking, and heating facilities, making them a practical option for adventurous travellers. The downside is the limited space and the need to plan around campsite locations, especially in winter when weather conditions can be unpredictable.

Pros: Ultimate flexibility, cost-effective for groups, and immersion in nature.
Cons: Wild camping restrictions, weather can be challenging and the limited space in some vans may not be for everyone.
Best Spots: Campsites near Vík, Þingvellir National Park, and Lake Mývatn are perfect for campervans.

Camping

For those who love the outdoors, Iceland’s campsites are a budget-friendly way to stay close to nature.

With hundreds of campsites available, you can pitch a tent almost anywhere in the country and be surrounded by stunning scenery.

Most campsites offer basic facilities like showers and bathrooms, with some providing kitchens and electricity for an additional fee.

While camping is one of the cheapest accommodation options, it requires good gear and preparation, especially when weather conditions turn harsh in Iceland’s unpredictable climate.

Pros: Affordable, close to nature, and offers access to remote hiking trails.
Cons: Challenging weather conditions, requires good equipment and some areas are remote with limited facilities.
Best Spots: Þórsmörk, Landmannalaugar, and Húsafell offer excellent camping facilities and beautiful surroundings.