Reykjavík hotel stays are declining as more visitors choose to spend nights outside the capital — with South Iceland absorbing a growing share of overnight tourism. The shift reflects a broader change in how travellers move through Iceland, favouring the Ring Road corridor and coastal south over a Reykjavík-anchored trip.
Key takeaways
- Overnight stays in Reykjavík hotels have dropped relative to growth in South Iceland.
- South Iceland — including Vík, Selfoss, and the Suðurland region — is drawing more overnight guests.
- The trend points to travellers spreading itineraries beyond the capital and Golden Circle day trips.
- For local hotels outside Reykjavík, this represents a real business opportunity.
I’ve watched this shift happen from street level. A few years ago, visitors would base themselves in Reykjavík — staying on or near Laugavegur, the capital’s main shopping and eating street — and drive the South Coast as a long day trip. Waterfalls like Seljalandsfoss and Skógafoss, the black sand beach at Reynisfjara, and the glacial lagoon at Jökulsárlón are all within 180–370 km of the capital. Doable in a day, but exhausting. Increasingly, travellers are sleeping closer to what they actually came to see.
According to data reported by Iceland Review, overnight stays in Reykjavík have fallen while South Iceland has recorded growth. The numbers align with what accommodation owners in places like Hvolsvöllur and Kirkjubæjarklaustur have been quietly saying for a couple of seasons — bookings are up, and guests are staying two or even three nights rather than just breaking a long drive.
Why South Iceland hotel stays are growing
The South Coast is Iceland’s most-visited non-capital region, and with good reason. The concentration of accessible, dramatic landscape per kilometre of Road 1 — the Ring Road — is hard to match anywhere else in the country. But the growth in overnight stays isn’t just about scenery. It’s about time.
Visitors who once rushed Reynisfjara and turned back by 4 pm are now arriving the night before, catching the beach in morning light before the tour buses arrive, and heading east toward Vatnajökull — Europe’s largest glacier — the next day. That kind of itinerary simply requires a bed outside Reykjavík. Guesthouses around Vík, the southernmost village in Iceland, charge roughly 25,000–40,000 ISK per night for a double room depending on season — significantly less than comparable Reykjavík hotels, which adds another practical incentive.
There’s also the matter of new accommodation supply. Several hotels and guesthouses have opened or expanded in South Iceland over the past few years, giving travellers options that didn’t exist before. Choice drives bookings.
For Reykjavík, the dip in hotel stays doesn’t mean the capital is losing its appeal. The city still draws visitors for its food scene, cultural institutions, geothermal pools, and the sheer convenience of Keflavík International Airport nearby. But the old pattern — fly in, stay in Reykjavík for five nights, take day trips — is giving way to something more distributed. Some guests now arrive, spend one night in the capital to recover from the flight, then head south or east and only return to Reykjavík for the last night before flying home.
That’s a shift worth watching. For the Icelandic tourism economy overall, it’s arguably healthy — spreading visitor spend more evenly across regions that have long lived in the capital’s shadow.
Frequently asked questions
Why are Reykjavík hotel stays falling?
More visitors are choosing to overnight in South Iceland and other regions rather than staying exclusively in the capital. Better accommodation options outside Reykjavík, combined with travellers wanting more time at the sights they came to see, are driving the change.
Which parts of South Iceland are seeing the most growth in overnight stays?
The Suðurland region — covering areas around Selfoss, Hvolsvöllur, Vík, and the stretch toward Kirkjubæjarklaustur — is where most of the growth is concentrated. These areas sit along the South Coast’s most popular attractions, making them logical overnight stops.
Is it cheaper to stay in South Iceland than in Reykjavík?
Generally, yes. Guesthouses and smaller hotels in South Iceland typically run 25,000–40,000 ISK per night for a double room, while equivalent Reykjavík hotels often cost more, especially in peak summer. The price difference is one reason travellers are increasingly willing to base themselves outside the capital.
