Where to Stay in Iceland: Accommodation Explained

Choosing where to stay in Iceland isn’t the difference between a simple hotel-or-Airbnb decision the way it might be for a city break. Between hotels, guesthouses, hostels, farm stays, cabins, and camping in all its forms, the range of Iceland accommodation is wider than most expect. Picking the right mix is important, since you’ll likely be changing beds every night or two on a Ring Road trip. Here’s our guide to Iceland accommodation…

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We’ll run through every type worth knowing about, from Iceland hotels at one end to a tent on uncultivated land at the other, including a few properties worth booking for the stay itself, then get into the legal basics of camping, campervans, and sleeping in your car. After that, we’ll cover how to choose where to stay in Iceland based on your actual route, and when to book if you want any choice at all.

Types of Accommodation in Iceland:  A Quick Overview

Here’s the full range of accommodation types in Iceland, roughly from most to least structured, so you can see where your trip style fits before diving into the details on each.

Hotels in Iceland

Iceland’s hotels range from international chains in Reykjavik to small, independently run properties out in the regions, and standards are generally good across the board, if more expensive than other places you’ll visit. You can expect fewer choices the further you get from Reykjavik and the Ring Road’s main towns, so don’t assume you’ll find a hotel everywhere you might want one. One great option is the Hotel Hofn, in the town of the same name. There’s an in-house restaurant, although we didn’t use it, and an in-house cat too.  Book early, this is popular with small tour groups.

Guesthouses in Iceland

Guesthouses sit between hotels and homestays; they’re usually family-run (but you might not see a member of staff during your entire stay.  They often come mainly with shared bathrooms in the older or more rural properties, and they’re the backbone of accommodation in smaller towns where a full hotel wouldn’t make sense. A lot of the time in Iceland, they’re often the only real option once you’re off the main Ring Road towns, so it’s worth getting comfortable with the format rather than holding out for a hotel that may not exist, or be within your budget where you’re headed.  Most guesthouses in Iceland also have a shared kitchen, or some form of cooking area that you can have access to.  The Hlin Guesthouse, for instance, has rooms with private bathrooms, rooms with shared bathrooms, and an excellent shared kitchen and dining area.  However, as they provide (an excellent) breakfast, the kitchen is not available during breakfast time.

Hostels in Iceland

Hostels are common in Reykjavik and increasingly available in larger regional towns, offering dorm beds alongside private rooms in most cases. They’re the cheapest option that still comes with a proper bed, a kitchen you can use, and other travelers to compare notes with, which matters if you’re traveling solo and want that anyway.  Hostels are generally the most cost-effective place to stay that has solid walls (I’m including tent camping in that cost comparison), and you will always find a shared kitchen and dining area here as well. Special hostels?  Try Huseyhostel – which is also a working horse farm. Like the idea of Icelandic horses? Read my guide to the Icelandic Horse here.

Cabins & Summerhouses in Iceland

Cabins and summerhouses, often clustered together in small groups rather than standing alone, give you a kitchen, some space, and sometimes a hot tub, all of which make a real difference after a long driving day. They’re popular with families and groups for exactly that reason, and often better value than a hotel room once you’re splitting the cost.  You’re likely to find them on the edges of campsites, so if you’re not in a campervan or tent camping, then this is a good option.  My favorite?  Hellisholar Cottage: – we might be in Iceland’s South Coast, but we’re in a wooden cottage in a field, and there’s no one around.  We have a full “cottage”, with a kitchen, four beds, a table, a deck, and a private bathroom.  It’s lovely.  Make sure you go for the kitchen option for maximum flexibility.

Farm Stays in Iceland

Farm stays put you on a working farm, sometimes with animals you can see up close, and they’re one of the more memorable ways to experience rural Iceland rather than just drive through it. Expect a simpler setup than a guesthouse in most cases, in exchange for a properly different kind of night than a standard room offers.  Memorable farm stays?  Well, there’s the Husey Horse Farm that I’ve already mentioned, but also try Efstídalur Farm Hotel. 

It’s a working dairy farm with rustic rooms, farm-fresh meals, and seriously good homemade ice cream. You can ride Icelandic Horses during summer, and enjoy geothermally heated hot tubs at all times of the year. Book a room with a terrace to enjoy the volcanic landscape here.

Once-in-a-Lifetime Accommodation in Iceland

Some nights in Iceland are worth booking around the stay itself, not just where it happens to sit on your route. Here’s a handful of properties where the accommodation is the whole point.

Glass Igloos

Panorama Glass Lodge is near Hella in South Iceland, and it’s a cluster of glass-fronted igloos built specifically for watching the sky rather than looking away from it. Each one comes with its own hot tub and a hammock net strung up inside, so you can lie back and watch for the Northern Lights without leaving your room. Check availability here if a night spent staring at the sky sounds like your kind of splurge.

A Modern Turf House

The Torfhús Retreat takes Iceland’s traditional 19th-century turf house, grass roof, stone-and-mud walls, and rebuilds it as a proper boutique stay. Ten cottages spread across the property, most single-bedroom, a few doubles, all built around the same medieval style that shaped Icelandic homes for centuries.

A longhouse on-site doubles as reception and restaurant, so the whole place leans into the theme rather than treating it as decoration. Check availability here for a stay that’s as much history lesson as hotel room.

The Blue Lagoon’s Own Retreat

Most people know the Blue Lagoon as the crowded, milky-blue spa near Keflavik, but tucked to the side of that same property is a second, private lagoon reserved only for guests of the Retreat. Rooms and Suites here come with access to the Retreat Spa and dining from the on-site Michelin-rated restaurant, and the top-tier suite includes its own walk-in lagoon, no sharing the water with anyone else at all. Check availability here if you want the Blue Lagoon experience without the crowds that usually come with it.

Sleep in a Bubble

The Bubble Hotel does exactly what the name suggests: a transparent bubble set up in a remote forest, built for one purpose: watching the Northern Lights from bed. It only runs from mid-April to September, and the exact location stays hidden until booking, shared only as GPS coordinates once you’ve confirmed your stay. Go in with realistic expectations about the lights themselves; they’re never guaranteed on any given night, but the bubble itself delivers regardless. Check availability here to bring this one home for your trip.

Camping, Campervans & Sleeping in Your Car — The Legal Basics

Iceland’s camping rules are more specific than most people expect, and getting them wrong can mean a real fine rather than a warning.

Tent Camping

Wild camping with a small tent is generally allowed on uncultivated land, with some VERY specific rules.  You can do it for a single night, if there is no official campsite nearby, and no local signs ban it. You can’t do this within a national park or nature reserve without permission.

Established campsites are the safer, simpler default nearly everywhere, charging a small fee per person per night (many allow you to pay via the Parka app), and a Camping Card covering a set number of nights across a network of sites is worth considering if you’re moving between campsites often rather than settling in one place.

Campervans

The core legal basics above apply here too; wild camping in a campervan is strictly forbidden. Many campsites have dedicated campervan pitches, and some offer power hookups, it’s worth checking when you book if that matters to you.

Sleeping in Your Car

The same legal basics apply again. Parking overnight somewhere that isn’t a designated rest area or campsite is generally treated the same as unauthorized camping, not simply “parking,” and fines for this are real and enforced. If you’re planning to sleep in a rental car rather than book accommodation each night, treat it exactly like campervan camping and use an established site.

How to Choose Accommodation Based on Your Route

Where you stay should follow your route, not the other way around, and a handful of towns work as natural bases for entire regions rather than just a single night’s stop. On the South Coast, Vík is the natural base for exploring that stretch, central enough to reach most of the route’s key stops without backtracking. On Snaefellsnes, Hellisandur, Grundarfjörður and Arnarstapi both work well as a base for the peninsula, depending on which side of the loop you’re focusing on. I’ve covered this and other key information in my guide on how to plan a trip to Iceland here.

Booking Tips for Accommodation in Iceland

Summer accommodation sells out quickly.  Well, it does all the time.  We had to drastically change our itinerary to account for a lack of accommodation in mid-June. Popular guesthouses and cabins in small towns sell out well early, so don’t assume waiting until closer to your trip will leave you with options. Check availability here as early as you can once your route is set, especially if you’re set on a specific base town rather than whatever’s left.  If you want to keep your options open, book fully cancellable rooms and chop and change as you get closer to the time,

FAQs on Where to Stay in Iceland

Here are quick answers to the questions we hear most about accommodation in Iceland.

Is it legal to sleep in your car in Iceland?

No.  Not outside a designated rest area or established campsite. It’s treated the same as unauthorized camping, and fines are enforced.

Can you wild camp in Iceland?

With a small tent, on foot or by bike, on uncultivated land that isn’t posted as off-limits, yes, but there are VERY strict rules. With a car or campervan, no, use an established campsite instead.

How far in advance should I book accommodation?

For summer travel, book as early as you can once your route is confirmed. Small guesthouses and cabins in popular base towns sell out early.

What’s the cheapest type of accommodation in Iceland?

Camping at an established site, followed by hostel dorm beds, are generally the least expensive options.

Are there laundry facilities at accommodation in Iceland?

You’ll find laundry facilities at some locations, but you’ll have to search for it.  Our best find in this respect was on the Tröllaskagi Peninsula at The Northern Comfort Inn, Ólafsfjörður, where we had a private bathroom in what used to be a hotel. The hotel kitchen, restaurant, and lounge are all now shared spaces!  There’s free laundry – washing machines AND dryers, free coffee and tea, and a “help yourself to what’s in the kitchen” vibe going on here.  And I’m sitting on a leather Chesterfield sofa in the lounge writing this!  We love it – you will too.

Are there campsites along the Ring Road?

Yes, most towns along the route have at least one established campsite, though facilities vary considerably from site to site.  They’re also very seasonal.

Do guesthouses include breakfast?

Some do, some don’t, and it varies enough by property that it’s worth checking at the time of booking rather than assuming either way. We had a fabulous included breakfast at the Blabjorg Resort in North East Iceland, and another equally fabulous breakfast at the Hlin Guesthouse too.

Is it better to book one base or move around each night?

It depends on your route and pace. Basing yourself in a town like Vík or Grundarfjörður for a couple of nights cuts down on packing and unpacking, while moving nightly suits a faster-paced Ring Road trip better. In terms of packing, here’s my guide on what to pack for Iceland.

Are hostels common in Iceland?

Yes, especially in Reykjavik and the larger regional towns, less so in smaller villages where a guesthouse is more likely to be your only option.  The facilities are likely, though, to be the same; shared kitchens are very much a thing here in Iceland.  Even the fabulous Blabjorg Resort in the East of Iceland has rooms with a shared kitchen, and our only shared bathroom of the trip.  And there were 3 between 11 rooms.  All with great showers and super clean.  A shared kitchen.  An attic room. And the included breakfast was fabulous.  We woke up here on Iceland National Day and were treated to a special cake on checkout.  We loved it here.

Is unique accommodation in Iceland worth the extra cost?

For most of these, yes, since the accommodation itself is the reason to book rather than just a place to sleep between days out. They’re best treated as a splurge for a night or two within a longer trip, not the whole itinerary.

Do I need to tip housekeeping in Iceland?

No. Tipping is not usual in Iceland, read my guide to tipping here.

Final Words on Iceland Accommodation

Match your accommodation to your trip style rather than defaulting to whatever’s easiest to book. A quick Ring Road trip suits guesthouses and hotels that let you fall straight into bed, while a slower trip opens up farm stays, cabins, and camping as truly rewarding options rather than compromises. Either way, Iceland accommodation has a variety of options; you just need to be realistic about the prices.

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