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Reykjavik is a small capital compared to most of Europe’s big cities, which makes the “where to stay” question a bit different.
You’re mostly choosing how central you want to be, and how much you’re willing to pay for it.
Overall, expect prices to run high across the board, because Iceland is an expensive.
I’ve been to Reykjavik multiple times now, and my approach here is the same as everywhere else: I’m happy to pay a bit more for central or fancier spots, but can’t resist a good bargain either.
🥳 FAVORITE HOTELS AT A GLANCE
Best for Location: Center Hotel Plaza — right in the heart of downtown, about as central as it gets.
Best Budget Pick: Kex Hostel — I’ve reviewed this one in full here. Industrial-chic, right by the water, and full of character.
Best Pod-Style / Privacy on a Budget: CityHub Reykjavik — I’m already a fan of the CityHub brand from their Copenhagen location, and this one gives you the same private-pod setup here in Reykjavik.
Best for a Special Occasion: Reykjavik Marina — my pick if you want to splurge, right on the Old Harbour.
👉 I regularly update these guides, so you are working with up to date recommendations, prices and locations. This article was last updated August 2026.
Where to stay in Reykjavik – My Experience
Unlike a lot of the cities I write these guides for, Reykjavik doesn’t really have a long list of distinct neighborhoods to choose between. It’s a compact, walkable city built around a small downtown core, so the real decision is less “which neighborhood suits my trip” and more “how central do I want to be, and what’s my budget.”
Overall, I prefer good value even if that means paying a bit extra, and I lean toward central locations, especially if I’m only in the city for a few days — which is how most people experience Reykjavik anyway, since it’s usually the launchpad for day trips around Iceland rather than the main event itself.
During my multiple visits, I’ve stayed in various hotels (with groups of people and alone) as well as some budget options.
The districts and map
Reykjavik’s downtown core goes by a few names — Miðborg, or simply “101” after its postcode — and it’s genuinely where the vast majority of hotels, restaurants and things to do are concentrated.
Just north of it sits the Old Harbour, a quieter, more maritime-feeling pocket that’s still an easy walk from downtown. Beyond that, you’re looking at quieter residential areas like Vesturbær to the west, or Hlemmur to the east. Both are fine but I would say not essential for most visitors.
In the map below you can see the areas I recommend.
GREY: The area I recommended you stay in and around for best location
ORANGE: Laugardalur
BLUE: Hlídar
GREEN: Vesturbær
RED: Miðborg
🥳 TESTED TOP PICKS FOR ICELAND
- 📲 Best eSIM: Ubigi eSIM (my top pick for convenience and stability) 10GB for 7 days for $11 – Also get 10% your plan with discount code BACHELORTRAVEL
🏨 Best hotel in Reykjavik: KEX HOSTEL – awesome location, great prices for private and shared rooms
🚌 Airport transfer: Keflavík Airport → Reykjavík Bus (Flybus) — cheapest and most straightforward way to get into the city after landing
🍽️ Food experience: Reykjavík Food Walk (guided foodie walking tour) — if you only do one tour in Reykjavik choose this one!
The best areas to stay in Reykjavik
Downtown / Miðborg / 101 Reykjavik – Best Overall
This is the heart of the city, and where most visitors end up staying usually.
Laugavegur is the main shopping and nightlife street, and it runs right through it.
Pretty much everything you’d want to see or do on foot is within this small core. Some of the best things to do in Reykjavik are here, or start from here.
Unless you’ve been to Reykjavik many times before, this is the area you’ll want to spend the most time in.
PROS & CONS
👍 Pros
- Everything is walkable — restaurants, shops, museums, tour pickup points
- Most day tours (Golden Circle, South Coast, Northern Lights) pick up from downtown hotels
- The highest concentration of hotels at every price point
- Easy to get around without a car
👎 Cons
- The most expensive part of the city for hotels
- Sometimes areas around Laugavegur get loud on weekend nights if you’re sensitive to noise
- Parking is genuinely difficult if you’ve rented a car
Where to stay in Miðborg
Accommodation here will set you back a few hundred per night at best and expect at least $300-$400 for nicer hotel rooms in the summer.
There are some great hostels in the area, if you don’t mind sharing a room to bring your overall costs down.
These are my most favorite options, that are worth splurging on, or staying for a few nights during a special occasion.
🔎 Don’t leave Reykjavík without booking the Reykjavík Food Walk. It’s the one experience I recommend to everyone visiting Iceland. You can read my full review here.
🔥 BEST OVERALL
My shower with a view of Ingólfstorg Square
Center Hotel Plaza
From around $300/night
A very well located hotel, right across from the main square. You’ll be just a few minutes walk to some of the core attractions and still quite close to the water and to the pond (Tjörnin). In the off season rates can be as low as $300, but in the summer expect that to be doubled. I once stayed in one of their executive rooms and it had a great bathroom and awesome views of the city. Breakfast is also really good!
🔥 BEST HOSTEL
Source: Booking.com
KEX Hostel
From around $40/night
KEX is both stylish and well located with a range of amenities. It has private rooms that I’ve stayed in before and also dorm rooms that range from 4 to 8/16 or even 42-beds in size. There is a heated outdoor terrace, perfect for late night sky watching, a self-service laundry room and every floor has interesting thematic decorations. Private rooms go from $90-$400 and dorms are $30-$90.
🔥 BEST OVERALL
Source: Booking.com
Fosshotel Baron
From around $180/night
There are 4 Fosshotel named hotels in the area of Reykjavik, with Baron being one of the most family-friendly and affordable options. It also has a bit of history as the first concrete building ever built. I quite enjoy the location (it is right next to KEX) and while space is tight, it has everything you need in affordable prices.
🔥 BEST FOR SOLO TRIPS
Source: Booking.com
City Hub
From around $120/night
This is another great hostel, especially if you live private sleeping areas. City Hub offers “hubs” or “pods” in a way that are quite small but have enough room for a bed and your bags. You won’t have much space but it still works for couples in my experience. Unfortunately there is no sauna (other locations do have it) but you do get an outdoor hot tub that is free to use and perfect for watching the night sky.
RECOMMENDATIONS
☕ What to eat or check out in the area
- KAKTUS Espressobar — Great coffee stop in Reykjavík with specialty coffee
- Kaffibrennslan — One of my go-to cafés for breakfast or a light lunch. Good bagels, excellent hot chocolates, and a cosy upstairs seating area if you need a break.
- Loo.Koo.Mas — Tiny Greek-inspired doughnuts with all kinds of creative toppings.
- Brauð & Co. — Probably Reykjavík’s most famous bakery, known for its colourful exterior and incredible cinnamon rolls. Expect a queue but it moves quickly.
- Bæjarins Beztu Pylsur — Iceland’s legendary hot dog stand. Cheap, quick, and surprisingly delicious. It’s practically a rite of passage.
💥 Important things in the area:
- Hallgrímskirkja for panoramic views from the tower.
- Laugavegur, Reykjavík’s main shopping and café street.
- Harpa Concert Hall and the waterfront.
- Tjörnin (The Pond) and the colourful streets of the Old Town.
- The Sun Voyager sculpture, especially around sunset.
Vesturbær – Best for a Quieter, Maritime Feel
Vesturbær is quite a large area that is trendy and traditional. It includes the part of the Old Harbor, the Old West Side near Tjörnin.
There are way less hotels here and the small handful is next to the water. You can find some apartments though on platforms like Airbnb.
I would stay here if you’ve been to Reykjavik before or if you prefer some of the other activities like whale watching tours.
PROS & CONS
👍 Pros
- The Old Harbour/Grandi end is quieter than downtown, without losing walkability to it
- Whale-watching tours depart right from the harbour
- Great seafood restaurants nearby
- Some of the city’s most design-forward hotels are in this pocket
👎 Cons
- Fewer hotel options than Miðborg
- The further west/south you go (toward the airport), the less walkable it gets
- Still requires a short walk into the main downtown core for most sights
Where to stay in Vesturbær
There are far fewer hotels once you move into Vesturbær proper, so most of the options I’d consider are clustered around the waterfront and Old Harbour.
For this article, I’m treating that waterfront stretch as one area, even though parts of it technically cross back into Miðborg. The two blend into each other around the harbour, and this is also where you’ll find some of Reykjavík’s most expensive hotels. The Reykjavík EDITION, for example, can easily cost $500–$600+ per night and is one of the most luxurious spots in the area.
The hotels below, like Reykjavík Marina and Grandi by Center Hotels, give you the same general waterfront location at a much more reasonable price.
🔥 BEST VALUE
Source: Booking.com
Reykjavik Marina
From around $200/night
This 4-star hotel is so much more value than the price point suggests. It has a nice balance of location value and modern style with quirky design without trying too hard. You can walk to the Old Harbour in just a couple of minutes for whale watching tours, restaurants and cafés.
🔥 BEST VALUE
Source: Booking.com
Grandi by Center Hotels
From around $220/night
Another great option in the same area, with modern amenities and Scandinavian design. It also has a gym as well as a spa and wellness area. The on-site restaurant is quite good, and the breakfast is an add-on of about $30 per person.
RECOMMENDATIONS
☕ What to eat or check out in the area
- Hygge Kaffi og Bakarí — My favourite café in Vesturbær for excellent coffee, fresh pastries, and a relaxed neighbourhood atmosphere.
- Kaffivagninn — Reykjavík’s oldest restaurant and a great spot for breakfast or seafood overlooking the Old Harbour.
- Omnom Chocolate Ice Cream Shop — Homemade ice cream and Iceland’s famous Omnom chocolate. Perfect for an afternoon treat.
💥 Important things in the area:
- Harpa Concert Hall
- The Sun Voyager sculpture along the waterfront
- Whale-watching tours departing directly from the harbour
There are also various fun activities like:
- The Lava Show
- Whales of Iceland
- Saga Museum
- FlyOver Iceland
Hlíðar and Laugardalur – Maybe Skip
These areas are both quite large, but I’ve marked on the map the parts where it makes sense to stay that still are fairly central.
Unless this is a repeat visit, I would say these put you quite far away from the action.
They are better spots if you are renting a car while in Reykjavik though, since parking can be more efficient.
Hlíðar and Laugardalur are both mostly residential, with Laugardalur in particular known more for its park, swimming pool, and sports facilities than anything you’d need on a short visit.
One thing I will note is that usually I have no issue with walking and/or relying on public transport when travelling.
With Reykjavik however, it makes so much more sense to be in the central part of town, especially when the weather is not good.
But if you’re visiting in peak summer, I can see more reasons to not care if you’re far away on foot.
PROS & CONS
👍 Pros
- Sometimes easier to find parking if you have a rental car
- Quieter and much more residential areas
- Sometimes you might find a better deal
- Laugardalur puts you close to Laugardalslaug, one of the best known public swimming pools
👎 Cons
- You are further from attractions and restaurants
- Less convenient for short stays
- Might end up relying more on buses
- The savings don’t always justify staying further out
Where to stay in Hlíðar and Laugardalur
As mentioned I’d look here if prices downtown are completely crazy.
You can prioritize the western edges of these areas rather than going further east, for best location.
There is also a great place here worth splurging on though. The Tower Suites Reykjavik first opened in 2016 and features just 8 luxury suites, with a lot of amenities and perks plus famous sweeping views.
Which is to say… not all hotels in this area are more affordable.
Of the affordable options in the area, I really like Hotel Lights. It covers all the basic needs and is good value for money when sacrificing location.
🔥 BEST COMFORT
Source: Booking.com
Tower Suites Reykjavik
From around $600/night
There are 8 panoramic view suites in this apartment complex, with floor to ceiling windows, plus a range of amenities and perks like free on site parking, breakfast, concierge services and access to spa’s thermal facilities. They can accommodate up to four guests, and are often booked in advance for the popular dates. Expect to pay about $1500 per night during peak summer season.
🔥 BEST VALUE
Source: Booking.com
Hotel Lights
From around $170/night
The hotel is about 20-minute walk from the center, but prices make up for it. Even during summer you can find better rates than downtown, and off-season drops to as low as $170. Breakfast included, free parking, a 24-hour front desk and laundry facilities. They also have a private dormitory room, which sleeps up to 10-people with a private bathroom and sitting/desk area, which is great if you are a large group.
How to find the best hotels prices
Most good hotels in Reykjavik get booked fast.
If you leave it to the last minute you’ll have to deal with fewer available options plus increased prices.
I have found 4-5 weeks to be the minimum time frame for securing something decent, but I would estimate even more if you’re planning to visit during the summer.
You can use the map below to quickly browse prices for the areas I mentioned.
Have more questions about Reykjavik?
Here are some more guides to help you plan your trip:
- 20+ Awesome Things to Do in Reykjavik That Are Worth Your Time and Money
- How to Get from Keflavík Airport to Reykjavík (2026 + Prices)
- Iceland Food Tour Review: Should You Book One?
- 12 Apps That Will Save Your Iceland Trip (What I Use Every Time)
- What & Where to Eat in Iceland to Save Your Budget (2026 with Prices)
- Best eSIM Options for Iceland (Tested) 2026
Ready to book? Top Iceland recommendations
📲 Best eSIM for Iceland: Easiest option is Ubigi — reliable across the country and super easy to set up before landing. Check full review here.
🚌 Airport transfer: Book the Keflavík Airport → Reykjavík bus (Flybus) — cheapest and easiest way into the city after landing. Here are all the options and why I chose this one.
🏨 City hotel option: I’d stay somewhere central in Reykjavík for the first day or 2-3 days if you want to see everything. I love KEX Hostel out of all the hotels I’ve tried. Super interesting design, social space, amazing location.
🎟️ Top Iceland activities:
There are so many good activities and tours to do in Iceland. Here are some of my favorites:
- From Reykjavik: Golden Circle, Kerid, & Secret Lagoon Tour
- Reykjavik: Guided Foodie Walking Tour with 6 Tastings
- Skaftafell: Blue Ice Glacier Hike on Vatnajökull
- Reykjavik: the Original 3-Hour Whale Watching Tour (I have had this tour cancelled on me a few times due to weather, but I will get it next time.)
🚗 Car rental: If you’re doing the Ring Road, compare prices on DiscoverCars — this is what gives you the most flexibility
🗺️ Must-have apps: Download/bookmark road.is and Vedur (Iceland weather) before your trip — you’ll use them daily. Also download all these apps as well.
👚Packing list: Iceland is much more enjoyable with the right gear. Here is what you need to pack and bring.
