5. Hotel Dalvik (North Iceland)
Hotel Dalvik is a solid pick for anyone trying to keep costs down in North Iceland without giving up too much comfort. It sits along the coast of Eyjafjordur, close enough to Akureyri that day trips are easy and practical.
Summer brings plenty of visitors to the area for whale watching, and the hotel works well as a base for exactly that. Godafoss waterfall and the Diamond Circle route are both reachable by car, as is the Lake Myvatn Area and the geothermal spots in that part of the country.
Rooms range from shared dorms to private options. There are also bungalow-style units — similar to cottages in Dalvik — with their own kitchen and living area, which makes them a good fit for families or anyone staying more than a night or two. Shared kitchens, free Wi-Fi, parking, and breakfast all help keep the overall bill manageable.
4. Hafaldan HI Hostel | Old Hospital (East Iceland)
Hafaldan HI Hostel | Old Hospital is one of the most affordable places to stay in Seydisfjordur, a town with its own distinct character and a loyal following among travellers passing through East Iceland. The building was once a hospital, which gives it a bit of history — though you’d never feel it in the comfortable, well-kept rooms.
Seydisfjordur sits just off the Ring Road, which keeps it quieter than a lot of other spots around the country. From here it’s easy to get out to Egilsstadir, the Vok Baths, or the lesser-visited stretches of the Eastfjords. Cafes, shops, and basic services are all within walking distance.
The hostel has private rooms, family rooms, and dorm beds, so it works for solo travellers and groups alike. Shared kitchens, common areas, free Wi-Fi, and a small on-site sauna — that last one is genuinely rare among budget stays in Iceland.
3. The Barn (South Iceland)
The Barn is a well-liked budget option on the South Coast of Iceland, sitting close to the village of Vik. It has the feel of a rustic place that’s been thoughtfully updated — bunk-bed family rooms for groups, double rooms for those wanting a bit more privacy.
Location is one of its strongest points. Right on the Ring Road, it works as a natural stopping place for anyone making their way along the South Coast. Reynisfjara Black Sand Beach is just a short drive away, and both Skogafoss and Seljalandsfoss are reachable without much effort. Vik itself has shops, services, and a handful of natural landmarks nearby.
If you want an affordable, well-placed base for the South Coast without any fuss, The Barn delivers.
2. Hotel Cabin (Reykjavik)
Hotel Cabin sits just outside the busiest part of the city — things are a little quieter here, but downtown Reykjavik is still an easy walk or short bus ride away. For travellers who want reasonable prices without being stuck far from everything, it’s a dependable choice.
There are several room types, from compact standard rooms to larger options with more space. All rooms have private bathrooms and flat-screen TVs. Free Wi-Fi, parking, and a daily breakfast buffet round things out without pushing the price too high.
The hotel is close to Laugardalur, Reykjavik’s main recreational area, home to Laugardalslaug Swimming Pool, Reykjavik Botanical Garden, and the Reykjavik Family Park & Zoo. Tour pick-ups run nearby, and road access for day trips out of the city is straightforward.
1. Kex Hostel (Reykjavik)
Kex Hostel occupies a converted biscuit factory right in the heart of Reykjavik — and it’s hard to think of a better budget option in the city. The industrial design works, the atmosphere is genuinely lively, and it has a local feel that a lot of hostels aim for and rarely pull off.
It’s right by the Reykjavik seafront, close to Hallgrimskirkja Church and Harpa Concert Hall. Laugavegur, the city’s main shopping street, is just around the corner, putting restaurants, bars, shops, and most of what Reykjavik has to offer within easy reach.
Dorm beds and private rooms cover most budgets, and the facilities — communal kitchen, laundry, a gym, a library — are well above average for a hostel. Kex also has a reputation as one of the best live music venues in Iceland, with regular gigs and events, and some of the cheapest beer you’ll find in the city.
For a budget stay that actually has something going on, Kex Hostel is hard to beat.
