Where to stay in Reykjavik on a budget

Logan Ly | Live the World

December 30, 2022

Who says Iceland and its capital city, Reykjavik, have to be expensive? Here are affordable stays you can book!

So you’re ready to explore the land of fire and ice, and ready to make Reykjavik your base - now where to stay… and without breaking the bank? Ok, it’s true, travelling around Iceland isn’t often that budget-friendly. This is a Scandinavian country after all, and sure food may be pricey and some excursions add up - but hey, that doesn’t mean your accommodation has to be.

There’s a plethora of options ranging from cosy budget-friendly guesthouses to sociable hostels. Whether you’re in Reykjavik looking for adventure or here for a quick getaway (hey, those Icelandic layovers come in super handy!), we’re sharing from our friends who are based in Iceland as well as from our own experiences of staying in Reykjavik over the course of our travels, which cost-conscious accommodations are worth it to book for your next stay. Otherwise, if you want to switch it up with a place that's more luxurious, we also have hand-picked recommendations for the most fantastic hotels in Reykjavik here.

Also while you’re exploring Reykjavik, be sure to check out our favourite activities to do in the city:

Reykjavik Downtown Guesthouse

1. Reykjavik Downtown Guesthouse

  • There’s a shared kitchen guests can feel free to use
  • An on-site tour desk helps guests with excursions
  • Offers a paid airport shuttle service

This guesthouse quite simply has one of the best locations in Reykjavik for accommodation, since it’s within walking distance of the sites that you’ll want to explore. Have your pick between a mixed dormitory room or an-all female dormitory room! The rooms at the Reykjavik Downtown Guesthouse are well-sized, so you won’t feel claustrophobic nor will you have to share your room with 16 other travellers. Also, a heart breakfast is included with your booking, so you can set off on your day exploring Reykjavik well-fed and not having to worry about splurging more on food!

Check out more photos and book your stay here at Reykjavik Downtown Guesthouse!

Igdlo Guesthouse

2. Igdlo Guesthouse

  • Self-service laundry services are available
  • A communal kitchen and dining room available for guests
  • Bathroom facilities can be found on each floor

Igdlo Guesthouse has the huge advantage of being located only 500 metres from Reykjavik Bus Terminal. For travellers looking to base themselves in Reykjavik or getting out of the capital city to explore the rest of Iceland, you won’t have to worry about hauling your luggage too far here! There’s also an extremely comforting and cosy feel to the guesthouse, since it’s run by a local family, it also feels like you’re staying in an Icelandic local’s home. That adds to the charm of the place, especially when you’re on the road! Bonus, in the summer months, there is also an on-site barbecue facility that you can use to grill up your meals.

Check out more photos and book your stay here at Igdlo Guesthouse!

Reykjavik Peace Center Guesthouse

3. Reykjavik Peace Center Guesthouse

  • Several lounges and a library you can enjoy
  • Staff can help arrange activities like hiking, skiing and horse riding
  • Two communal, fully equipped kitchens

Reykjavik Peace Center Guesthouse lives up to its name as being a quaint, tranquil accommodation in Iceland’s capital city. That’s because staying here, you’ll feel like you’re staying in a local’s home - which is a big deal in Iceland since the small Icelandic population means this is a great way to see a side of the country that not many people get to experience otherwise! The guesthouse looks like a cottage, which adds to its charm even though it’s in a city. While it’s located in Reykjavik, the neighbourhood is more residential - so if you have a car and have been driving around, then this guesthouse is perfect for you.

Check out more photos and book your stay here at Reykjavik Peace Center Guesthouse!

Baron's Hostel

4. Baron's Hostel

  • Features its own quaint garden
  • property is close to popular attractions like Laugavegur Shopping Street, Harpa Concert Hall & Conference Centre and Reykjavik Old Harbour
  • Every room comes with a shared bathroom with a shower

What we really enjoy about Baron’s Hostel is that no matter which room you’re in, or quite frankly, which part of the hostel you’re hanging out in, there’s always ample natural light streaming through. The hostel was built with plenty of huge windows, and here’s a treat - depending on which room you get, you’ll be able to see Reykjavik’s iconic Hallgrímskirkja. Hallgrímskirkja is the Lutheran parish church with its unique spaceship-like architecture piercing through the capital’s skyline. The couple that also owns and hosts guests at the hostel is super lovely and really friendly too, adding that welcoming hospitality to your stay.

Check out more photos and book your stay here at Baron’s Hostel!

Loft - HI Hostel

5. Loft - HI Hostel

  • Lockers and bed linen are included
  • The rooftop terrace has an awesome view of the city
  • Features a sociable lounge and bar

If you’re looking for a sociable and friendly place to rest, drink, and make new friends during your time in Reykjavik - then Loft - HI Hostel is the place you’ll want to book. Perhaps it’s because this eco-hostel is only a few pedestrian-walking steps away from Reykjavík's main bustling street - Laugavegur. Or maybe because the common areas and hanging out parts of the hostel encourage travellers from different parts of the world to interact and get to know one another. No matter if you’re a solo traveller or if you’re looking to make new friends, then this is a great hostel for you.

Check out more photos and book your stay here at Loft - HI Hostel!

Hostel B47

6. Hostel B47

  • Travel Sustainable accommodation
  • Includes a garden, a shared lounge and a terrace
  • For those doing a road trip, this hostel includes free private parking

Why we choose to stay at Hostel B47 time and time again just can’t be summed up in one sentence. First, you have the cinematic ringing of the nearby church bells which you can hear in the hostel. It adds to the magic of travelling in Iceland! The showers and washroom facilities are kept well-cleaned and modern, on top of having quite a lot of them around the hostel so you’ll be certain that you won’t have to worry about waiting around to use one. Different rooms around the hostel also have cute themes based on different cities and movies, adding a touch of wonder during your stay.

Check out more photos and book your stay here at Hostel B47!

Kex Hostel

7. Kex Hostel

  • On-site bar with musical events happening every Thursday to Saturday.
  • Access to a communal kitchen on site
  • Buffet breakfast is available each morning

Literally less than a minute's walk away is Laugavegur shopping street, possibly one of the most vibrant areas in Reykjavik, which makes the Kex Hostel one of the best centrally located accommodations in the capital. On top of the excellent location is just how well-designed this hostel is - from the vintage maps to globes and trinkets, the interior is made to inspire your wanderlust. For travellers on the go, on-site luggage storage is available (making it a huge bonus for any day trip). This also happens to be one of the biggest hostels in the whole country - with one dormitory room fitting 42 beds (yep, exact number!). But despite its size, rest assured that the hospitality here is still close-knit and caring.

Check out more photos and book your stay here at Kex Hostel!

Grettir Guesthouse

8. Grettir Guesthouse

  • Features self-service check-in
  • Easy-to-use code entrance
  • Travel Sustainable accommodation

You’ll literally be in the heart of Reykjavik by staying at Grettir Guesthouse. While you’ll for sure explore Laugarvegur and come by it a few times while roaming around the city, it’s nice to have this guesthouse just a stone's throw away from it. So you’ll truly get the best of both worlds - from being smack in the middle of the city, but tucked away enough that it’s still peaceful and calm around your stay. On top of that, I just absolutely adore that the guesthouse is in a traditional Icelandic house, one that looks exactly like a cottage in the Nordic countryside. There’s a Scandinavian charm to the guesthouse that you will certainly find irresistible.

Check out more photos and book your stay here at Grettir Guesthouse!

Bus Hostel

9. Bus Hostel

  • All rooms include secure lockers
  • Bed linen and blankets are included
  • The front desk offers a tour and ticket service

Staying at Bus Hostel is truly a stay of utter convenience - the front desk (which is 24/7 by the way) offers a tour and ticket service making planning your Icelandic trip a breeze. On top of that, the sightseeing tours depart from the hostel daily - so you don’t even have to make your way to any other meeting spot. Also if you enjoy a good pint of beer, there’s an on-site bar that serves it up. To add to the bar’s feature, there’s a daily happy hour that travellers can indulge in too!

Check out more photos and book your stay here at Bus Hostel!

100 Iceland Hotel

10. 100 Iceland Hotel

  • Each room here will provide you with a satellite TV and a work desk
  • The bathrooms include free toiletries, also laundry facilities on-site
  • Travel Sustainable accommodation

With the seafront of Reykjavik just a few steps away, nature is close by as well as spectacular views of the water (and the mountains in its distance). Adding to its superb location of being within walking distance of all of the main sites of the capital city, there’s also a bus stop nearby that goes to the airport and back. So if you have a lot of luggage, no fret - step off the bus and you’re already close to your hotel! Also, there is an elevator inside the accommodation, so you won’t have to trudge your bags up and down. 100 Iceland Hotel may be simple, but it will have everything you need to make your stay in Reykjavik awesome, and without breaking the bank at it.

Check out more photos and book your stay here at 100 Iceland Hotel!

Planning a full Iceland trip?

Let us help you with our pre-made, completely adjustable itinerary for Iceland! This is our ultimate Iceland in 7 days itinerary where you’ll start from Reykjavik and then loop around the country’s famed ring road.

Also, sometimes we just want to book one night away that's a true getaway treat - and for those hotels, we rounded up a list of the best of the best in Reykavik for you to check out here.

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