Reykjavik is a small, compact city where almost all accommodation is within easy walking distance of the main attractions. The choice is less about neighbourhood and more about style and budget — from luxurious Icelandic design hotels with geothermal showers and Northern Lights viewing opportunities to sociable hostels on Laugavegur and charming guesthouses in restored historic houses. Iceland is one of the most expensive countries in Europe, and accommodation costs reflect this.
Reykjavik is a small, compact city where almost all accommodation is within easy walking distance of the main attractions. The choice is less about neighbourhood and more about style and budget — from luxurious Icelandic design hotels with geothermal showers and Northern Lights viewing opportunities to sociable hostels on Laugavegur and charming guesthouses in restored historic houses. Iceland is one of the most expensive countries in Europe, and accommodation costs reflect this — budget carefully, as prices are significantly higher than most European destinations.
Top Areas to Stay
The City Centre (101 Reykjavik) — the 101 postal district covering the area around Laugavegur, Hallgrímskirkja, and the old harbour — is where virtually all visitors stay, and for good reason: it puts you within walking distance of every major attraction, restaurant, and bar. The area is small enough that the difference between staying at the northern (harbour) end versus the southern (Hallgrímskirkja) end is just a 10-minute walk. The Old Harbour (Grandi) area, west of the city centre, has seen significant development in recent years — hip restaurants, whale watching tours, and a couple of excellent boutique hotels with maritime character. Laugardalur, about 3km east of the centre, is a quieter residential area with Iceland's largest public geothermal pool complex and some budget accommodation, connected to the centre by frequent buses.
Luxury Options
Reykjavik's luxury hotel scene has grown considerably. The Hotel Borg on Austurvöllur Square — an Art Deco masterpiece from 1930 — is the city's most historic and prestigious hotel, combining Icelandic elegance with a central location opposite the Althing (parliament). The ION Adventure Hotel (45 minutes from Reykjavik near Þingvellir) offers spectacular Northern Lights viewing from floor-to-ceiling windows and a geothermally heated infinity pool — one of the world's most extraordinary hotel experiences. The Reykjavik EDITION is the city's most contemporary luxury offering, with harbour views and the city's finest hotel bar. For boutique luxury, Apotek Hotel (a converted former pharmacy) and the CenterHotel Þingholt deliver Icelandic design and excellent service.
Mid-Range and Boutique Stays
Reykjavik has excellent mid-range options. The Kvosin Downtown Hotel offers well-designed apartment-style suites in a central location with full kitchens — ideal for longer stays or those wanting to self-cater (essential in Iceland to control costs). Canopy by Hilton Reykjavik City Centre offers contemporary rooms, a locally-sourced breakfast, and a great central location. The Alda Hotel on Laugavegur provides stylish rooms in a Scandi-Icelandic aesthetic at the heart of the action. Budget €150–€250 per night for mid-range accommodation in Reykjavik — expensive by European standards, but Iceland's costs across the board are high.
Budget Accommodation
Budget travellers face a challenge in expensive Reykjavik. The best hostel options are the Hlemmur Square (a converted bus terminal turned hostel-hotel hybrid with excellent facilities) and Kex Hostel near the old harbour — a hugely popular social hostel in a former biscuit factory with a craft beer bar, regular events, and a great atmosphere. Guesthouse Óðinn and similar family-run guesthouses offer simpler private rooms at lower prices. Budget minimum €35–€50 for dorm beds and €100–€140 for budget private rooms — significantly more expensive than most European cities. Self-catering in an apartment (via Airbnb) can reduce overall costs substantially.
Booking Advice
Reykjavik accommodation fills quickly at certain times of year. June–August (midnight sun season) and the Northern Lights season (October–March) are both busy, requiring booking 2–4 months ahead for the best properties. The Reykjavik Culture Night (August) and Iceland Airwaves music festival (November) cause significant price spikes — book immediately when planning to attend these events. New Year's Eve in Reykjavik is legendary (the city stages a spectacular midnight bonfire and fireworks display) and accommodation for December 31st sells out many months in advance. Use Booking.com or book directly with smaller guesthouses for potential discounts. Many properties include breakfast; confirm this when booking as it can significantly affect value.