Iceland Hostels & Budget Stays

Hostels in Reykjavik

Reykjavik has a genuinely good hostel scene by international standards — clean, well-located, and often with private room options alongside dorms, which makes them a reasonable choice even for travelers who wouldn't normally consider a hostel. Booking ahead matters more here than in many destinations, since the best-located hostels sell out early in summer.

Guesthouses outside the capital

Once you're on the road, small family-run guesthouses are often the best value option outside Reykjavik — typically simple rooms, sometimes with shared bathrooms, at a noticeably lower price than hotels in the same town. They're common in South Coast towns like Vík and Hella, and become close to essential in smaller Eastfjords and Westfjords communities where hotel options are thin.

Camping

Iceland has an extensive network of campsites, many with basic facilities (toilets, showers, sometimes a small kitchen), and camping is comfortably the cheapest way to see the country if you're prepared for it. A few rules matter:

• Wild camping (outside designated sites) is heavily restricted and, in many areas, simply not allowed — stick to official campsites.
• A good four-season tent and sleeping bag are essential even in summer; nighttime temperatures can drop close to freezing.
• Campervan rental is a popular middle ground between camping and hotels, combining transport and accommodation in one booking.

Cutting other costs to offset accommodation

• Travel in shoulder season (April–May, September–October) for meaningfully lower accommodation rates than peak summer.
• Book directly or well ahead rather than last-minute; prices for remaining rooms tend to rise, not fall, close to arrival dates.
• Consider a guesthouse or hostel with breakfast included — it often works out cheaper than buying separately.

Realistic expectations

Even budget accommodation in Iceland tends to cost more than equivalent options in much of continental Europe — that's the nature of a small, remote island economy. The goal with these strategies isn't a rock-bottom trip, but a noticeably more affordable one without sacrificing the experience.