Where to Stay in Iceland: A Neighbourhood Guide for 2025

From Reykjavík's 101 district to the guesthouses of Akureyri, here's how to pick the right base for your Iceland trip.

Reykjavík: Downtown vs. the Suburbs

Downtown Reykjavík, especially the 101 postcode around Laugavegur and Skólavörðustígur, puts you within walking distance of Hallgrímskirkja, Harpa concert hall, and the Sun Voyager sculpture. Expect to pay 25,000–35,000 ISK per night for a mid-range double in summer; in winter, rates drop to 15,000–22,000 ISK. Parking is scarce and expensive, so book a hotel with a garage if you rent a car. The area buzzes with bars and restaurants, but light sleepers should avoid rooms facing the main streets on weekends.

For a quieter stay, consider the 105 district near Hlíðar and Kringlan shopping mall, or the 107 area around Vesturbær. These neighbourhoods are 10–15 minutes by bus (routes 1, 3, 6) from downtown and offer free street parking. Hotels here cost 18,000–28,000 ISK in summer, and you're closer to the domestic airport for trips to the Westman Islands. I'd book 101 for a first visit without a car, and 105 if you have a rental and want easy access to Route 1. Skip the generic hotels near Keflavík airport unless you have a 6 AM flight—they're isolated and overpriced for what they are.

The Golden Circle and South Coast: Where to Base Yourself

Selfoss, 57 km from Reykjavík, is the largest town in South Iceland and a practical base for the Golden Circle. Guesthouses and small hotels charge 20,000–30,000 ISK in summer. From here, Þingvellir is 40 minutes, Geysir 1 hour, and Gullfoss 1 hour 15 minutes. The town has a Bonus supermarket and a few decent restaurants, but it's not scenic. For something more atmospheric, Hvolsvöllur (106 km from Reykjavík) sits near the Seljalandsfoss waterfall and the LAVA Centre. Rates are similar, but you're 30 minutes closer to Vík and the black-sand beaches.

Further east, Vík í Mýrdal is the last stop before the vast Skeiðarársandur plain. Hotels here book out months in advance for July and August; expect 30,000–45,000 ISK. It's worth it for the Reynisfjara basalt columns and the chance to see puffins at Dyrhólaey in summer. If you're continuing to the glacier lagoon at Jökulsárlón (190 km east), consider a night in Höfn, where rooms are 25,000–35,000 ISK and the langoustine is legendary. I'd skip the unpronounceable farm stays unless you have a 4x4—many are on gravel roads that are impassable in winter.

North Iceland: Akureyri and the Lake Mývatn Area

Akureyri, Iceland's second city, is a 4.5-hour drive from Reykjavík (390 km) or a 45-minute flight. The compact centre has a striking church, botanical garden, and a good selection of hotels and guesthouses. Prices range from 20,000–35,000 ISK in summer. It's an ideal base for whale watching in Húsavík (1 hour away) and the Goðafoss waterfall (35 minutes). The town has a geothermal pool, Sundlaug Akureyrar, which is a local favourite. Parking is easy and mostly free. If you're on a budget, look at the university area south of the centre.

Near Lake Mývatn, 1 hour east of Akureyri, accommodation is limited to a handful of hotels and guesthouses. The standout is the Mývatn Nature Baths area, but rooms there cost 35,000–50,000 ISK in peak season. You're paying for proximity to the geothermal baths, Dimmuborgir lava formations, and Krafla volcano. The nearest town with services is Reykjahlíð, which has a small supermarket and petrol station. I'd book at least two nights here if you want to explore without rushing. Avoid the campsite unless you have a campervan—tent camping is only for the hardy, given the midges in summer.

West Iceland and the Snæfellsnes Peninsula

The Snæfellsnes Peninsula, often called 'Iceland in miniature,' is 2 hours from Reykjavík. Stykkishólmur, a charming harbour town, has guesthouses from 18,000–28,000 ISK in summer. It's a good base for the ferry to the Westfjords and for exploring the peninsula's lava fields, black churches, and Snaefellsjökull glacier. Grundarfjörður, further west, offers views of Kirkjufell mountain, one of Iceland's most photographed peaks. Accommodation is limited; book early. Both towns have small restaurants and fuel stations. The roads are paved and manageable in a standard car, but winter driving can be treacherous.

For a quieter alternative, consider Borgarnes, 75 km north of Reykjavík on the Ring Road. It has a handful of hotels, a swimming pool, and the Settlement Centre. Rates are 15,000–25,000 ISK. From here, you can do day trips to the Snæfellsnes Peninsula or the Golden Circle. I'd book Borgarnes if you want a central west coast base without the crowds. Skip the hotels right at the ferry port in Stykkishólmur if you're a light sleeper—the ferry arrives early. Overall, for a first trip, I'd split my stay: 2 nights in Reykjavík, 2 on the South Coast, and 2 in the north or west, depending on your interests.

Questions, answered

What is the best area to stay in Reykjavík for first-time visitors?

Downtown 101 is best for walkability to Hallgrímskirkja, Harpa, and Laugavegur. Expect 25,000–35,000 ISK per night in summer. If you have a car, 105 or 107 offer free parking and lower rates, 18,000–28,000 ISK.

How far in advance should I book hotels in Iceland for summer?

Book 3–6 months ahead for June–August, especially for Vík, Akureyri, and Mývatn. Popular guesthouses sell out by March. Winter bookings can be made 1–2 months ahead, but check for holiday closures.

Is it better to stay in one place or move around Iceland?

Moving gives you more variety and reduces driving. A common split is 2 nights Reykjavík, 2 South Coast, 2 North or West. If you prefer a single base, Reykjavík works for day tours, but you'll miss the north's charms.

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