Looking for the best affordable hotels in Reykjavik? Finding cheap hotels in Iceland isn’t an easy task. To save you hours of research time, I’ve rounded up the best budget-friendly stays, including family-friendly apartments, central hotels and boutique, stylish options that won’t completely blow your Iceland budget.
I’ll also show you the best areas to stay in Reykjavik and share tips for finding cheaper accommodation.
Contents
- What Affordable Actually Means in Reykjavik
- Best Budget & Very Low-Cost Hotels in Reykjavik
- Best Family-Friendly Hotels in Reykjavik
- Best Boutique Hotels in Reykjavik (Without Blowing the Budget)
- Where to Stay in Reykjavik – Area Breakdown
- Booking Tips
- FAQ
- Related Posts
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When we booked our trip to Iceland we were expecting all Iceland hotels to cost way more than our budget allowed and we didn’t think we’d find any cheap hotels in Iceland. However, we did actually find a few budget-friendly hotels and apartments.
Unfortunately our first choice cancelled on us just before our trip. We panicked as we were travelling over New Year, one of the busiest times to visit but luckily we found an alternative that suited our needs perfectly.
If you’re searching for a budget hotel, family-friendly or low-cost boutique hotel in Reykjavik, I’ve rounded up the best hotels that we found whilst doing our own research and included our family friendly stay. We literally trawled through hundreds of reviews and checked out all the best locations – I’ve also added pros and cons and approximate prices to help you decide.
What Affordable Actually Means in Reykjavik
Ok, so you’re not going to find a cheap hotel in Reykjavik compared to budget hotels in other European cities but I can assure you that there are definitely a few options that will hopefully fit within a smaller budget and not just basic options – I’ve also stumbled across a few nice boutique hotels too.
| ✨ Top Tips: •Staying outside of the city centre gives you a few more budget options •Self-catering accommodation will save you a lot more than you think on the cost of eating out |
Best Budget & Very Low-Cost Hotels in Reykjavik
CityHub Reykjavik
A unique hostel hotel offering capsule accommodation with amazing, unexpected facilities like a hot-tub and modern cosy restaurant.
If you’re looking for somewhere different, CityHub Reykjavik is worth a look. Rather than traditional hotel rooms, you get compact private sleeping pods with shared bathroom facilities. It’s much more stylish and comfortable than usual hostel accommodation, with a hot tub, bar and games room.
It’s right in central Reykjavik on Hverfisgata, so you can walk to many of the city’s main attractions, restaurants and bars. The location scores an impressive 9.7 on Booking.com.
Best for: Solo travellers, couples and anyone looking for a fun, modern budget stay.
Facilities:
- Private sleeping pods
- Shared bathrooms
- Free Wi-Fi
- Hot tub
- Bar
- Games room
- Luggage storage
- 24-hour reception
- Breakfast available
- Air conditioning
Pros:
- Excellent central location
- Surprisingly stylish for a budget property
- Hot tub is a great bonus
- Very highly rated
- Rooms are soundproofed
- Good choice if you want something a little different
Cons:
- Rooms don’t have ensuite bathrooms
- Sleeping pods are compact
- Not suitable for children under 6
- Less privacy than a traditional hotel room
Our verdict: CityHub is a quirky budget option in Reykjavik. If you’re happy to share a bathroom, you get a fantastic location and some facilities you wouldn’t normally expect at this price.
Images courtesy of Expedia Partners
Review score: 9.1/10 Prices from: £91 per night Check availability for your dates
Exeter Hotel
Exeter Hotel is a more traditional hotel choice. It offers good value for a stylish hotel in central Reykjavik. It’s in the Old Harbour area, around a five-minute walk from Harpa Concert Hall, with restaurants, attractions and the waterfront all nearby.
The industrial-style interiors give it a much more upmarket feel than you might expect from a hotel costing around £100 a night.
Best for: Couples and city-break travellers who want a stylish hotel without paying inflated prices.
Facilities:
- Free Wi-Fi
- Restaurant
- Bakery
- Bar
- Sauna
- Steam room
- Fitness centre
- 24-hour reception
- Nespresso coffee machine
- Refrigerator
- Breakfast available
Pros:
- Fantastic central location
- Stylish modern design
- Sauna and steam room
- Restaurant and bakery on site
- Excellent facilities for the price
- Close to the harbour
Cons:
- Some rooms can feel quite dark
- Rooms can get too warm
- Not the cheapest option once breakfast is added
Our verdict: If you want something that feels more like a proper boutique hotel but still want to keep the price down, Exeter is a really good option. The location is particularly hard to beat.
Images courtesy of Expedia Partners
Review score: 8.8/10 Prices from: £104 per night Check availability for your dates
Hotel Local 101
Hotel Local 101 is a lovely independent hotel tucked away on a quiet street in the heart of downtown Reykjavik. It’s only around three minutes from the harbour and close to shops, cafes, bars and restaurants.
The hotel has a cosy Scandinavian feel, with small “hygge” rooms.
Best for: Couples and travellers wanting a stylish, central hotel with a great breakfast.
Facilities:
- Free Wi-Fi
- Breakfast
- Restaurant
- Bar
- Fitness centre
- Laundry
- Terrace
- Concierge service
- Family rooms
Pros:
- Superb location
- Friendly staff
- Excellent breakfast
- Independent hotel with character
- Close to the harbour and city centre
- Stylish but relaxed atmosphere
Cons:
- Rooms are small
- Not the cheapest budget option
- Limited facilities compared with larger hotels
Our verdict: At £155, it’s more “affordable boutique” than ultra-budget, but if you want a proper hotel in a brilliant location, Hotel Local 101 is worth considering.
Images courtesy of Expedia Partners
Review score: 9.0/10 Prices from: £155 per night Check availability for your dates
Best Family-Friendly Hotels in Reykjavik
Iceland Comfort Apartments
Iceland Comfort Apartments are in Kópavogur, just outside Reykjavik, and are a particularly useful option if you’re travelling as a family. This is where we stayed after our first choice central apartment cancelled on us last minute. Instead of a traditional hotel room, you get an apartment with a kitchenette, seating area and private bathroom.
The apartments are basic but comfortable. They’re located around a 10-minute drive from downtown Reykjavik. There’s a mini-supermarket opposite and a few restaurants close by. We found the free parking very handy.
Best for: Families and self-catering travellers who want more space and facilities than a standard hotel room.
Facilities:
- Family rooms
- Kitchen/kitchenette
- Private bathroom
- Free Wi-Fi
- Free parking
- TV
- Seating area
- Terrace
- Lift
- Heating
- Airport shuttle
Pros:
- Apartments rather than basic hotel rooms
- Kitchenette makes self-catering easier
- Free parking
- Family rooms
- Grocery shop nearby
- Quieter than central Reykjavik
- Around 10 minutes by car from downtown
Cons:
- Outside central Reykjavik – a 10-minute drive to the centre
- Lower review score than some of the other properties on this list
- Self check-in rather than a traditional hotel reception
- You’ll probably want a car or use public transport
Our verdict: This is the sort of accommodation that can save a family money in Iceland. Having somewhere to make breakfast or prepare food can make a surprisingly big difference to your overall holiday budget. The location is difficult without a car.
Images courtesy of Expedia Partners
Review score: 7.5/10 Prices from: £160 per night Check availability for your dates
Tower Apartments
Great for if you’re travelling with a family or group and need space. The apartments have proper kitchens, living areas and balconies, with some apartments sleeping up to six people.
They’re also in a very convenient location, with Laugavegur just a short walk away.
Best for: Families and groups who want an apartment with plenty of space and self-catering facilities.
Facilities:
- Fully equipped kitchen
- Oven and hob
- Microwave
- Dishwasher
- Washing machine
- Private bathroom
- Balcony
- Free Wi-Fi
- Family rooms
- Lift
- Children’s playground
- Parking
- Shuttle service
Pros:
- Exceptional 9.6 review score
- Much more space than a hotel room
- Excellent kitchens
- Balconies
- Washing machine
- Great for families and groups
- Very good location
Cons:
- More expensive than the other family options
- Apartment-style accommodation rather than a traditional hotel
- Parking isn’t necessarily as straightforward as at suburban properties
Our verdict: Tower Apartments aren’t the cheapest option on my list, but if you’re travelling as a family, the ability to cook, wash clothes and spread out can make the extra cost worthwhile.
Review score: 9.6/10 Prices from: £216 per night Check availability for your dates
Best Boutique Hotels in Reykjavik (Without Blowing the Budget)
Reykjavik Marina – Berjaya Iceland Hotels
Reykjavik Marina is one of the best options on this list if you want a hotel that feels a little special without paying full boutique-hotel prices. It’s in the popular 101 harbour district, with harbour or city views from rooms and Reykjavik Art Museum just a few minutes’ walk away.
It’s also right beside the harbour where whale-watching tours depart, which is handy if you’re planning excursions.
Best for: Couples and travellers wanting a stylish waterfront location at a relatively affordable price.
Facilities:
- Free Wi-Fi
- Restaurant
- Bar
- Breakfast
- Family rooms
- 24-hour reception
- Tea and coffee facilities
- Some rooms with balconies
- Fireplace/lounge
- Cinema
Pros:
- Excellent harbour location
- Great atmosphere
- Stylish interiors
- Close to restaurants and attractions
- Whale-watching departures nearby
- Good choice for couples
Cons:
- Some rooms are small
- Prices can rise considerably during busy periods
- Harbour location can mean more activity and noise
Our verdict: At around £103, this is a bargain for a boutique-style hotel.
Images courtesy of Expedia Partners
Review score: 8.6/10 Prices from: £103 per night Check availability for your dates
Hotel Eyja
Hotel Eyja is a stylish hotel just off Laugavegur near Hlemmur Square. It has a distinctive Balinese-inspired design, four-poster beds and views towards the city and Mount Esja.
It’s a little different from the minimalist Scandinavian style you’ll find in many Reykjavik hotels, and it has an impressive breakfast as well as free parking.
Best for: Couples and anyone wanting a boutique feel with excellent facilities.
Facilities:
- Free Wi-Fi
- Free parking
- Restaurant
- Bar
- Fitness centre
- Breakfast
- Bicycle hire
- Laundry
- 24-hour reception
- Tea and coffee facilities
Pros:
- Stylish and unusual interiors
- Excellent breakfast
- Free parking
- Fitness centre
- Good location near Laugavegur
- Some rooms have sea, mountain or city views
- Eco-friendly touches
Cons:
- A little further from the old harbour than some central hotels
- Prices can rise during peak dates
- Boutique style won’t appeal to everyone
Our verdict: Hotel Eyja is a really good example of what I mean by an affordable boutique hotel.
Images courtesy of Expedia Partners
Review score: 8.9/10 Prices from: £129 per night Check availability for your dates
Hotel Holt – The Art Hotel
Hotel Holt is a historic four-star boutique hotel in central Reykjavik that dates back to 1965. Its unique selling point is the art: the hotel houses Iceland’s largest privately owned art collection, making it feel like a small gallery.
Best for: Art lovers, couples and anyone looking for a more traditional boutique-hotel experience.
Facilities:
- Free Wi-Fi
- Free parking
- Bar
- Breakfast
- 24-hour reception
- Laundry
- Lift
- Tea and coffee facilities
- Electric vehicle charging
- Art collection
Pros:
- Loads of character
- Fantastic central location
- Unique art collection
- Free parking
- Excellent breakfast
- Smaller and more personal than a large hotel
Cons:
- Rooms and decor may feel more traditional than modern
- Review score is lower than some of the other boutique choices
- More expensive than the cheapest options on this list
Our verdict: If you like a hotel with a story rather than a generic modern hotel, Hotel Holt is a lovely option. The art collection gives it something very special.
Images courtesy of Expedia Partners
Review score: 8.4/10 Prices from: £159 per night Check availability for your dates
Vintage Apartment Hotel
Vintage Apartment Hotel is right on Laugavegur, Reykjavik’s main shopping street, so you’re surrounded by restaurants, bars, shops and attractions.
The apartments have kitchenettes, making this another useful option for anyone trying to save money on their food costs.
Best for: Couples, families and longer stays where having your own kitchen is useful.
Facilities:
- Kitchenette
- Fridge
- Oven
- Microwave
- Toaster
- Private bathroom
- Free Wi-Fi
- Family rooms
- Lift
- Breakfast bag
- Wine bar
- Some apartments have balconies
- Some have sea or city views
Pros:
- Superb central location
- Apartment-style accommodation
- Kitchen facilities
- Great for self-catering
- Very comfortable beds
- Breakfast can be delivered to your room
- Wine bar on site
Cons:
- More expensive than some of the other options
- No traditional reception desk
- No on-site parking
- Breakfast is a breakfast bag rather than a buffet
- Prices can rise significantly at busy times
Our verdict: Vintage Apartment Hotel is a great choice if you want the convenience of being right in the middle of Reykjavik but still want the ability to prepare some of your own meals.
Images courtesy of Expedia Partners
Review score: 8.9/10 Prices from: £209 per night Check availability for your dates
Where to Stay in Reykjavik – Area Breakdown
Where you stay in Reykjavik can make quite a difference to the price of your accommodation. The city centre is the most convenient, but as is often the case in most cities, it’s usually more expensive. If you’re prepared to stay a little further out, you can often find better-value hotels and apartments – particularly if you’re hiring a car.
We stayed quite far out from the centre and I would definitely book more central accommodation next time.
Here are the main areas to consider when looking for cheap hotels in Reykjavik.
101 Reykjavik – Best for First-Time Visitors
If it’s your first trip to Reykjavik, 101 Reykjavik is probably the easiest place to stay. This is the heart of the city, with Laugavegur shopping street, Hallgrímskirkja, Harpa Concert Hall, the Old Harbour, restaurants, cafes and bars all within easy walking distance.
It’s also particularly convenient if you’re booking tours, as many excursions pick up from central Reykjavik.
Pros:
- Everything is within walking distance
- Lots of restaurants, cafes and bars
- Great for first-time visitors
- Easy access to tour pick-up points
- No need for a car
Cons:
- Usually more expensive
- Can be noisy around the nightlife areas
- Parking can be difficult and expensive
Hlemmur & Hlíðar – Best for Budget Travellers
If you’re looking for cheap hotels in Reykjavik, the Hlemmur and Hlíðar areas can give you a good compromise between price and location.
Hlemmur is at the eastern end of the main downtown area, around the famous food hall, while Hlíðar is a little further out. You’re still close enough to walk into the centre, but accommodation can be cheaper than directly on Laugavegur.
Pros:
- Often cheaper than the very centre
- Still relatively close to downtown
- Good public transport connections
- Plenty of accommodation choices
- Good option for budget travellers
Cons:
- Not quite as atmospheric as 101
- Some parts are more residential
- You may need to walk or take a bus into the centre
Vesturbær & Grandi – Best for a Quieter Stay
West of the city centre, Vesturbær has a much more residential feel. The Old Harbour and Grandi area have become particularly popular for restaurants, food halls and attractions, while the southern part of Vesturbær is quieter and more local.
You’re still close enough to walk into central Reykjavik, making this a good compromise if you don’t want to be right amongst the nightlife.
Pros:
- Quieter than central Reykjavik
- Still within walking distance of downtown
- Close to the harbour
- Great restaurants and food options
- More residential atmosphere
Cons:
- Fewer budget hotels than central areas
- Some parts are a little further from the main attractions
- Can be more expensive around the harbour
Laugardalur – Best for Families
Laugardalur is a greener, more residential area east of the centre and is particularly good for families. It’s home to Laugardalslaug geothermal swimming pool, the Reykjavik Family Park & Zoo, the botanical gardens and plenty of outdoor space.
It’s also well connected to central Reykjavik, so you don’t have to be right in the middle of the city to enjoy everything Reykjavik has to offer.
Pros:
- Family-friendly
- Lots of green space
- Large geothermal swimming pool
- Zoo and family attractions
- Quieter than downtown
- Often better value than 101
Cons:
- Not within walking distance of everything
- You’ll probably use buses, taxis or a car
- Less nightlife and atmosphere
Kópavogur – Best for Cheaper Accommodation & Self-Catering
This is where we stayed. Kópavogur is just south of Reykjavik and is technically a separate municipality, but for visitors it’s part of the wider Reykjavik area. It’s worth including in your accommodation search because you can sometimes find better-value apartments and hotels here than in the centre.
It’s easier if you hire a car, as it’s not within easy walking distance of the tourist attractions. Kópavogur also has shopping, restaurants, swimming pools and the Sky Lagoon.
Pros:
- Can be cheaper than central Reykjavik
- More apartments and self-catering accommodation
- Good for families
- Easier parking
- Good base if you have a hire car
- Close to Sky Lagoon
Cons:
- Not in Reykjavik city centre
- You’ll need transport to visit the main attractions
- Less atmospheric than downtown
Booking Tips
1. Compare several areas
Don’t just search for hotels in central Reykjavik. Moving even a little further out can open up cheaper hotels and apartments, particularly if you have a car.
2. Look at apartments as well as hotels
This is one of my biggest tips for Iceland. An apartment might cost more per night than a basic hotel room but could actually work out cheaper for a family or group once you factor in the cost of eating out.
Having somewhere to make breakfast, prepare packed lunches or cook dinner can make a big difference to your Iceland budget.
3. Check the total price
Don’t compare the nightly room rate alone. Check whether breakfast, parking, airport transfers or other extras are included before deciding which hotel is actually cheapest.
4. Book early for New Year
This is particularly important if you’re visiting over Christmas and New Year. Reykjavik is extremely popular at this time of year. We did book early but our accommodation cancelled our booking at the last minute and we found that accommodation choices became much more limited as our trip approached.
FAQ
What’s the cheapest area to stay in Reykjavik?
The cheapest area depends on your dates, but Hlemmur/Hlíðar, Laugardalur and areas outside central Reykjavik such as Kópavogur are worth checking if you’re looking for cheaper accommodation.
The further you move from 101 Reykjavik, the more likely you are to find budget-friendly hotels and apartments. However, make sure you factor in transport costs if you need buses or taxis to get into the centre.
Do Reykjavik hotels include breakfast?
Some do, but don’t assume breakfast is included in the room price. Icelandic hotels often offer breakfast as an optional extra.
Is it cheaper to stay near the airport or city centre?
Keflavik International Airport is not in Reykjavik – it’s around 50km from the city – so I wouldn’t choose accommodation near the airport simply because you think it will be cheaper.
If you’re visiting Reykjavik, staying in the city or the surrounding Reykjavik area will usually be much more convenient. Airport accommodation makes more sense if you have a very early flight or are arriving late at night.
Are there many hostel options in Reykjavik?
Yes. Reykjavik has a good choice of hostels, including options with dormitory beds as well as private rooms.
Hostels can be one of the cheapest ways to stay in Reykjavik, particularly if you’re travelling solo. If you want to compare hostels, Hostelworld is a useful place to start because you can compare prices, facilities and reviews in one place.
How far in advance should I book a Reykjavik hotel?
I’d book as early as you can if you have fixed dates, particularly if you’re travelling during popular periods such as Christmas, New Year or the summer.
Is Reykjavik expensive for hotels?
Yes – accommodation in Reykjavik is expensive compared with many other European cities. That’s why I’ve used “cheap hotels in Reykjavik” to mean the lower-priced end of the Reykjavik accommodation market rather than suggesting these are genuinely cheap by European standards.
You can still find some surprisingly good-value places, though, particularly if you’re willing to stay outside the city centre or choose an apartment or guesthouse.
Is it better to stay in central Reykjavik?
For a short first visit, I’d say yes if your budget allows. Staying centrally means you can walk to most attractions, restaurants and bars and makes joining day tours much easier. I would definitely stay centrally next time.
However, if you’re travelling on a budget, I wouldn’t rule out staying further out. Reykjavik is well connected by bus.
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