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Introduction to Iceland Hotels

Why Iceland is a Bucket List Destination

Imagine waking up to the view of volcanic landscapes dusted with snow, or the Northern Lights dancing across the sky right outside your hotel window. That’s Iceland in a nutshell. It’s not just a country—it’s an experience. A land forged by fire and ice, Iceland attracts millions of travelers each year with its jaw-dropping scenery, mystical folklore, and surreal natural phenomena.

But beyond the geysers, waterfalls, and lava fields lies a thriving hospitality scene. Iceland has mastered the art of blending rustic charm with modern elegance. Whether you’re an adventurer seeking remote wilderness or a honeymooner looking for a cozy luxury retreat, there’s something here for everyone. In fact, what makes Iceland’s hospitality so special is its personal touch—hoteliers here are not just hosts; they’re storytellers, often eager to share tales of elves, trolls, and Viking ancestry.

There’s also a strong cultural element in how Icelanders approach hospitality. You won’t find aggressive service here—instead, it’s warm, respectful, and often infused with a deep love for nature. Many hotels use geothermal energy, offer local food, and are built with sustainability in mind, which aligns perfectly with the Icelandic way of life.

The Evolution of Icelandic Hotels

Let’s rewind a bit. A few decades ago, accommodations in Iceland were sparse and simple—mostly guesthouses and a few urban hotels in Reykjavik. Tourism was minimal. Fast forward to today, and the transformation is nothing short of magical. As Iceland opened its arms to the world—especially post the Eyjafjallajökull eruption in 2010 which ironically put the country on the global map—its hotel industry experienced a renaissance.

Now, Iceland boasts an eclectic range of hotels—from luxury design hotels in Reykjavik to glass-roofed cabins in the middle of nowhere designed for Northern Lights viewing. Even budget travelers aren’t left out, thanks to the boom in hostels, Airbnb options, and self-catering guesthouses.

Icelandic hotels have also caught the global spotlight for their sustainability. Many are powered by clean geothermal energy, and it’s not uncommon to find organic, locally-sourced menus in even the smallest accommodations. There’s a heavy emphasis on local craftsmanship, whether it’s in the furniture, architecture, or amenities.

This evolution reflects Iceland’s ability to maintain its authenticity while embracing modern trends—something few destinations achieve so gracefully.

Types of Hotels in Iceland

Luxury Hotels

If you’re someone who likes to blend adventure with indulgence, Iceland’s luxury hotels will not disappoint. These are not your typical five-star properties—you won’t find sprawling resorts here. Instead, think boutique-style elegance, personalized service, and locations that take your breath away.

Hotels like The Retreat at Blue Lagoon redefine luxury. Nestled beside the world-famous geothermal spa, it offers a once-in-a-lifetime experience with its subterranean spa, private lagoon, and minimalist Icelandic design. Meanwhile, in Reykjavik, Hotel Borg and The Reykjavik EDITION cater to luxury travelers who want both style and convenience.

What makes these hotels truly special is their commitment to experience-based luxury. Imagine sipping champagne in an outdoor hot tub while watching the Northern Lights or enjoying a farm-to-table Icelandic tasting menu after a day exploring glaciers. Luxury here is less about opulence and more about unforgettable moments, unique design, and deep immersion into Iceland’s natural world.

Expect top-tier amenities—like floor-to-ceiling windows, custom Nordic furniture, private saunas, and geothermal baths. Prices reflect this exclusivity, but for many travelers, it’s worth every króna.

Budget-Friendly Accommodations

Let’s be honest: Iceland isn’t cheap. But budget travelers, don’t lose hope—you can still explore the island without draining your bank account. Iceland has a wide variety of affordable accommodation options that don’t skimp on charm or comfort.

Budget hotels and guesthouses are scattered across the island, offering clean, comfortable rooms with basic amenities. Many include shared kitchens, so you can save money by cooking your meals. Reykjavik Downtown HI Hostel and Hlemmur Square are excellent choices within the capital, offering dormitories and private rooms alike.

Outside the cities, many budget accommodations are small family-run guesthouses. These often provide the best insight into Icelandic life and might even include homemade breakfasts or tips on hidden hiking trails. The vibe is always warm and friendly—perfect for solo travelers or backpackers.

For those who crave freedom, campervan rentals are also popular. They combine transport and accommodation, allowing you to chase the Northern Lights or camp by waterfalls without worrying about hotel reservations.

Boutique and Design Hotels

If you’ve got an eye for aesthetics and love places with personality, Iceland’s boutique hotels are calling your name. These places go beyond basic shelter—they’re curated experiences.

Boutique hotels in Iceland often draw inspiration from the island’s natural beauty. You’ll find interiors that mirror volcanic rock, glacial colors, and mossy textures. One standout example is ION Adventure Hotel, located near Thingvellir National Park. Built on the side of a mountain, it looks like a futuristic spaceship—yet everything inside pays homage to Icelandic traditions.

Another favorite is Hotel Rangá, which offers themed suites based on different continents, alongside telescopes for stargazing. These hotels cater to travelers who value originality, comfort, and cultural immersion.

Unlike chain hotels, boutique accommodations in Iceland tend to be smaller and more intimate. This allows for better service and often includes unique perks like guided hikes, culinary workshops, or private hot springs.

Yes, they’re often priced higher than budget options, but the extra cost goes toward a richer, more memorable stay.

Guesthouses and Farm Stays

Want a truly authentic Icelandic experience? Skip the hotel chains and book a stay at a guesthouse or farm stay. These charming, family-run accommodations offer a warm welcome and a deep connection to the land and its people.

Guesthouses can be found across the country, from coastal villages to remote fjords. They’re typically small, cozy, and ideal for travelers who want a home-away-from-home vibe. Many include breakfast, and some even offer dinners prepared with ingredients sourced right from the surrounding farm.

Farm stays are particularly popular in rural areas. You might find yourself in a cozy cottage surrounded by horses, sheep, and endless nature. Some farms let you participate in daily activities—like feeding animals or milking cows—which is perfect if you’re traveling with kids or simply curious about Icelandic rural life.

These accommodations are affordable, but more importantly, they offer a level of warmth and personal interaction that larger hotels often can’t match. It’s like being invited into an Icelandic home.

Best Areas to Stay in Iceland

Reykjavik – The Urban Heart

Reykjavik isn’t just the capital of Iceland—it’s the cultural, culinary, and creative heartbeat of the country. With a population of just over 130,000, it feels more like a large town than a bustling city, but don’t let its size fool you. Reykjavik offers everything from world-class dining to vibrant nightlife and artistic experiences.

When it comes to accommodations, Reykjavik is loaded with variety. Whether you want to stay in a historic hotel like Hotel Borg, a hip hostel like KEX, or a sleek modern marvel like The Reykjavik EDITION, there’s something for every taste and budget. Most hotels are located in or near downtown, meaning you’re steps away from top attractions like Hallgrímskirkja, Harpa Concert Hall, and the Sun Voyager sculpture.

Another perk? Reykjavik is the best base for day trips. You can easily head out to the Golden Circle, Blue Lagoon, or South Coast and be back in time for dinner at a trendy Nordic bistro. For travelers who want a blend of comfort, convenience, and culture, Reykjavik is a must.

Plus, there’s nothing like winding down your day with a craft beer in a cozy pub or soaking in a local hot spring while the midnight sun glows—or the Northern Lights shimmer overhead.

Golden Circle – Nature’s Masterpiece

The Golden Circle is Iceland’s most famous tourist route—and for good reason. It covers three iconic sights: Thingvellir National Park, Geysir geothermal area, and Gullfoss waterfall. Staying near the Golden Circle means you’re in the thick of Iceland’s natural drama.

Accommodations here range from rustic lodges to luxury eco-resorts. ION Adventure Hotel is a standout, perched near Thingvellir and offering views you won’t believe are real. It’s perfect for travelers looking to combine adventure with indulgence. Meanwhile, cozy cabins and cottages are scattered throughout the area, providing privacy and unbeatable access to hiking trails and geothermal hot springs.

This region is especially ideal for first-time visitors and families. You get to experience Iceland’s powerful natural forces—without venturing too far from Reykjavik. Plus, if you rent a car, you’ll find hidden gems like the Secret Lagoon and Kerið Crater.

Booking early is essential, especially in peak summer or winter months when aurora chasers descend. Also, many lodges here are self-catering, so consider stocking up on groceries before you arrive.

South Coast – Waterfalls and Black Sand Beaches

If you’re craving cinematic landscapes, the South Coast delivers in spades. Think thunderous waterfalls like Skógafoss and Seljalandsfoss, the eerie basalt columns of Reynisfjara Beach, and glacier tongues that seem to stretch into infinity.

The towns of Vik and Hvolsvöllur serve as popular bases along this route. In Vik, you’ll find charming hotels like Hotel Kría, known for its minimalist style and breathtaking mountain views. Meanwhile, more remote stays—like Skálakot Manor Hotel—offer a boutique experience with a rural twist, complete with horse riding tours and in-house restaurants.

This area is a photographer’s dream and a haven for nature lovers. While winter conditions can be challenging, they also bring a chance to see frozen waterfalls and crystal-clear ice caves. Just make sure your rental car is 4×4 and well-equipped for changing conditions.

Whether you want to hike on glaciers, explore puffin cliffs, or just soak in the raw power of Icelandic nature, the South Coast is unforgettable.

North Iceland – Peace and Northern Lights

North Iceland is often overshadowed by the southern attractions—but that’s what makes it so special. Here, you’ll find fewer tourists, more authentic experiences, and stunning sights like Lake Mývatn, Dettifoss (Europe’s most powerful waterfall), and the Arctic coastline.

Akureyri, Iceland’s second-largest city, is a great hub for exploring the north. Hotels like Hotel Kea or Icelandair Hotel Akureyri offer modern comforts with easy access to restaurants, shops, and ski slopes.

For those seeking solitude, guesthouses near Húsavík (the whale-watching capital of Iceland) or cottages by Lake Mývatn provide tranquil retreats. Winter is especially magical here, as the region lies in the “Northern Lights belt,” making aurora sightings frequent and often spectacular.

One thing to note: the weather in North Iceland can be harsher, and driving conditions tricky in winter. But for travelers who value quiet beauty, stargazing, and off-the-beaten-path adventures, this region is gold.

Westfjords – Remote Beauty

The Westfjords are Iceland’s wildest frontier. Rugged, remote, and rarely visited, they offer jaw-dropping cliffs, sleepy fishing villages, and hidden hot springs. This area is for true adventurers.

Accommodation is sparse but memorable. Think family-run guesthouses like Heydalur Farm Lodge, where you can soak in geothermal pools surrounded by mountains. Or remote cabins that feel like the edge of the world, with only the sound of seabirds and the occasional arctic fox to keep you company.

Highlights include the dramatic cliffs of Látrabjarg (perfect for puffin spotting), the red sand beach at Rauðasandur, and Dynjandi waterfall—often called the most beautiful in the country.

Due to its remoteness, travel here requires planning. Roads can be challenging, and many routes are only open in summer. But if you make the trek, the rewards are immense. You’ll experience Iceland at its rawest and most untouched.

Top Hotels in Reykjavik

Canopy by Hilton Reykjavik City Centre

If you want modern luxury with a local twist, Canopy by Hilton hits all the right notes. Located in the heart of Reykjavik, it’s within walking distance of Laugavegur (the main shopping street), Hallgrímskirkja, and the harbor.

The hotel is sleek and stylish, featuring local artwork, Icelandic textiles, and custom furniture. Each room has a cozy feel, blending clean lines with warm touches like wool throws and bookshelves stocked with Icelandic literature.

The on-site restaurant, Geiri Smart, is a favorite among both guests and locals, offering elevated takes on Nordic cuisine. And don’t miss the daily tastings in the lobby lounge, where you can sample local spirits and treats.

The staff here excel at personal touches—think tailored recommendations, bike rentals, and even bedtime snacks. It’s a perfect choice for travelers who want to experience Reykjavik’s vibrant culture with top-notch amenities.

Hotel Borg by Keahotels

Step into old-world elegance at Hotel Borg, Reykjavik’s most iconic hotel. Located by Austurvöllur square, this Art Deco gem has hosted everyone from heads of state to pop stars.

Inside, you’ll find black-and-white marble floors, crystal chandeliers, and rooms that blend classic glamour with modern comfort. The spa and gym facilities are superb, and the in-house Borg Restaurant serves refined Icelandic fare.

What makes Hotel Borg stand out is its blend of history and luxury. It’s perfect for romantic getaways, special occasions, or travelers who appreciate timeless design and a central location.

Staying here is more than a night’s rest—it’s a step into Reykjavik’s rich past.

Kex Hostel – Chic & Affordable

Don’t let the word “hostel” fool you—Kex Hostel is one of Reykjavik’s coolest places to stay. Housed in an old biscuit factory, it’s funky, stylish, and surprisingly cozy.

The design blends vintage furniture with industrial chic, and there’s a real community vibe here. The lounge is lively, the bar serves craft beers, and there’s often live music or film screenings. You’ll meet travelers from all over the world while sipping coffee and looking out over the bay.

Rooms range from dormitories to private en-suites, making Kex ideal for both budget travelers and design lovers. It’s also kid-friendly and eco-conscious, with an emphasis on recycling and local sourcing.

If you’re into good vibes, unique decor, and a central location without a hefty price tag, Kex is your place.

Unique Hotel Experiences in Iceland

Hotels with Hot Springs Access

One of Iceland’s biggest attractions is its natural geothermal energy, which fuels everything from greenhouses to steamy hot springs—and hotels have capitalized on this wonderfully. Imagine rolling out of bed, throwing on a robe, and stepping into a private, naturally heated pool with steam rising into the chilly Icelandic air. That’s the kind of magic you can expect.

The Retreat at Blue Lagoon is the crown jewel in this category. Its suites feature private access to a secluded section of the world-famous Blue Lagoon, far away from the crowds. The spa here is carved into volcanic rock and offers treatments using the lagoon’s signature mineral-rich mud.

Another favorite is Hotel Husafell, located near the Langjökull glacier. While it may not be next to a world-famous lagoon, it offers elegant rooms, local cuisine, and easy access to nearby hot springs like Hraunfossar. Then there’s Frost and Fire Boutique Hotel in Hveragerði, where riverside hot tubs and thermal saunas are just part of the experience.

What makes these stays unforgettable is not just the access to geothermal water—but the way they enhance it with Icelandic flair: candlelit soaks, panoramic views, and that unforgettable blend of relaxation and rugged landscape.

Hotels Under the Northern Lights

One of the most mesmerizing reasons people flock to Iceland is to witness the ethereal dance of the Northern Lights. And trust us—there’s nothing quite like watching the aurora borealis from the warmth of your hotel bed, hot tub, or private glass cabin.

Hotels designed specifically with aurora-viewing in mind include Hotel Rangá, which offers nightly wake-up calls when the lights appear. Located in a dark-sky area far from city glow, it even has an on-site observatory with telescopes and guided stargazing sessions.

Another gem is Bubble Hotel Iceland, often referred to as the “5 Million Star Hotel.” These transparent bubbles are scattered throughout secluded forests, allowing you to sleep under the stars and watch the lights dance overhead—all while staying cozy in a climate-controlled dome.

Then there’s ION Adventure Hotel, with its huge glass windows and elevated location. It offers the perfect combination of modern architecture and remote wilderness. Some hotels even have skylights in rooms, so you don’t have to step outside to catch the aurora.

Booking during peak aurora season (September to April) and heading to remote areas gives you the best chance for success. Some hotels also offer guided Northern Lights tours if you want to chase them further into the wild.

Eco-Friendly and Sustainable Hotels

Sustainability isn’t a trend in Iceland—it’s a way of life. The country runs almost entirely on renewable energy, and many of its hotels follow suit, offering eco-conscious travelers peace of mind without sacrificing comfort.

ION Adventure Hotel again shines here with its sustainable design and energy-efficient infrastructure. Built into a lava field, it’s partially powered by geothermal energy and uses recycled materials throughout. It’s even won multiple eco-tourism awards.

Eyja Guldsmeden Hotel in Reykjavik combines Balinese décor with Icelandic hospitality. This eco-certified hotel offers organic breakfasts, sustainable amenities, and a strong commitment to reducing waste.

Even in remote areas, sustainability shines. Many guesthouses and farm stays utilize geothermal heating, solar panels, and green rooftops. Water is fresh from glacial springs, and the food often comes straight from local farms.

Staying at these places doesn’t just help the planet—it deepens your connection to Iceland itself. The ethos here is about living in harmony with nature, and these hotels make sure you experience that first-hand.

Booking Tips and Travel Advice

Best Time to Book

Timing is everything when it comes to Iceland. The country has two main tourist seasons: summer (June to August) and winter (December to February), each offering drastically different experiences. And when it comes to hotel availability, both seasons get busy—fast.

If you’re planning to visit during summer, book your hotel at least 3–6 months in advance, especially in popular areas like Reykjavik, the South Coast, or the Golden Circle. Summer is high season, thanks to the midnight sun, warmer weather, and open access to the Highlands.

Winter, while quieter, is also increasingly popular because of the Northern Lights. You’ll want to book at least 2–4 months ahead for best picks, especially if you’re chasing auroras or staying in boutique or luxury spots.

Shoulder seasons (May, September, early October) offer more flexibility, fewer tourists, and often lower prices. This is a great time to find deals while still enjoying Iceland’s iconic sights.

Lastly, remember that Iceland’s geography spreads out tourist destinations. If you’re planning a road trip or a ring road adventure, make your bookings along the route in advance. Accommodations in remote areas can be limited and may sell out months ahead.

What to Expect in Terms of Pricing

Let’s be real—Iceland isn’t a bargain destination. Accommodations here can be pricey, but the good news is you often get what you pay for in terms of cleanliness, safety, and stunning settings.

Here’s a rough breakdown:

• Budget hostels and guesthouses: $30–$70 per night (shared rooms), $70–$120 for private rooms
• Mid-range hotels and boutique stays: $120–$250 per night
• Luxury hotels: $300–$1,200+ per night depending on season and location

During peak times (especially summer), prices can spike even higher, especially for unique stays like glass igloos, hot spring hotels, or aurora-viewing domes.

To save money, look for stays that include breakfast, access to a kitchen, or partnerships with local tour operators. Booking directly through hotel websites can also offer perks like room upgrades or free parking.

Keep in mind: VAT is included in hotel pricing, and tipping isn’t expected. What you see is generally what you pay.

How to Choose the Right Area Based on Your Itinerary

Picking the perfect hotel is about more than just stars or amenities—it’s about location and how it aligns with your travel goals. Here’s a quick breakdown:

• City Explorers: Stay in Reykjavik if you’re into museums, restaurants, nightlife, and guided day trips.
• Nature Seekers: Opt for the Golden Circle or South Coast for easy access to waterfalls, geysers, and glaciers.
• Northern Lights Hunters: Head north or stay in rural South Iceland where skies are darker and clearer.
• Road Trippers: Book a series of stays along the Ring Road, covering all of Iceland’s diverse regions.
• Relaxation Lovers: Choose hotels with spa services, hot springs access, or countryside seclusion like in the Westfjords.

Also consider your driving comfort. Iceland’s roads can be tricky in winter, so basing yourself in areas with well-maintained routes might be a smarter choice.

Finally, plan your itinerary in loops instead of zigzags to reduce travel time and get the most out of your hotel choices.

Final Thoughts

Iceland is more than just a destination—it’s a dreamscape that stays with you long after you’ve left. And where you stay while you’re here matters. Whether you’re watching the Northern Lights through a glass dome, soaking in a geothermal spa under the stars, or waking up to the sound of glaciers cracking in the distance, your accommodation becomes part of the adventure.

The country offers an incredible range of hotels to suit every traveler—from luxury seekers and eco-warriors to backpackers and families. Choosing the right place to stay isn’t just about budget or comfort—it’s about enhancing your journey, connecting with the land, and experiencing the true spirit of Iceland.

So pack your bags, plan wisely, and let your Icelandic story begin—one incredible hotel stay at a time.

FAQs

1. What’s the best time of year to visit Iceland for hotel deals?
The shoulder seasons (May and September) offer the best balance of decent weather and reduced hotel prices. Winter also has some deals, especially outside the holidays.

2. Do Iceland hotels include breakfast?
Many mid-range and luxury hotels do include a breakfast buffet, while budget accommodations often provide access to a communal kitchen instead.

3. Can I see the Northern Lights from my hotel?
Yes—if you stay in rural areas away from city lights. Many hotels offer aurora wake-up calls or even rooms with skylights for viewing from bed.

4. Are there kid-friendly hotels in Iceland?
Absolutely. Family-run guesthouses, farm stays, and many hotels offer family suites, baby cots, and even activities like horseback riding or guided nature walks.

5. What are the most unique hotels in Iceland?
The Retreat at Blue Lagoon, Bubble Hotel, ION Adventure Hotel, and Hotel Rangá are some of the most unique, offering everything from lava spas to see-through domes under the stars.