Where to Stay in Reykjavik: Exploring Different Neighborhoods.

Iceland is quickly becoming a must-see destination for globetrotters. While there are many majestic sights to behold, this Nordic island has earned a reputation for being an expensive endeavor. However, with careful planning and with the help of our research, you can find out where to stay in Reykjavik without breaking the bank.

Reykjavik Neighborhoods 

Reykjavik is the country’s cultural, historical, and economic heart and will most likely be your first stop on your Icelandic vacation. The country’s capital offers hotel options, including everything from luxurious suites to smaller, hipper properties with distinct personalities. Even though lodging in Reykjavik is never particularly cheap, we’re sure you’ll find something that fits your budget.

Reykjavik is easily explored on foot and has an effective public bus system that connects the city to the nearby neighborhoods, making it simple to get around. If you’re on a budget or want to save money on your Reykjavik accommodation so you can enjoy the city’s other attractions, deciding where the best place to stay in Reykjavik can be challenging.

If you’re looking best area to stay in Reykjavik, here are some of the best neighborhoods to choose from:


Midborg is the main hotspot in Reykjavik. You can find many of the best stores, restaurants, bars, and attractions in the city’s downtown area. If you’re only visiting Iceland for a short period, you may want to book your Reykjavik lodging here. 

Travelers can take in the view of the city from the awe-inspiring Hallgrimskirkja church, experience life as a Viking at the Settlement Exhibition, and indulge in the delicacies at the Perlan (the Pearl.)

Keep in mind that while Midborg may boast many of the higher-end luxury amenities, it will also have the most expensive accommodations Reykjavik, Iceland, has to offer.


If you’re looking for where to stay in Reykjavik, Iceland that’s close enough to other neighborhoods but far enough apart to retain its own comfortable and stylish atmosphere, then you need to check into Vesturbaer. There’s a host of nightlife activities to take in, such as imbibing a local beer at Ægisgarður, the birthplace of Viking brewery. 

If you’re looking for a more cultural experience, you can visit the Living Art Museum, where you can see modern works of art by Icelandic and foreign artists. You can also make a trip to the Whales of Iceland exhibit. Here, you’ll come face-to-face with life-size models and interactive displays of these aquatic behemoths.


This residential neighborhood is a popular destination for backpackers and younger travelers, since this area has the largest number of hostels and budget hotels. So, if you’re looking for cheap places to stay in Reykjavik, Hlidar may be your best bet.

Aside from the lower-end accommodations, you can also find several unique activities to explore in this area, such as climbing atop the hill Oskjuhlid or visiting the Icelandic Phallological Museum, the only museum devoted to penises in the world.


If you’re traveling with family and are looking for where to stay in Reykjavik, there’s no better place than the Laugardalur neighborhood. This quiet and residential neighborhood is centrally located and well-connected to the community. It’s easy to walk to the Husdyragardurinn, a cozy little aquarium, or the Icelandic Elf School, a school that teaches all about elves, the Hidden People, and Icelandic folklore.

Types of Accommodations 

Many people are aware that Iceland is an expensive country to visit, but upon landing, they may still be surprised by the costs of things. A savvy traveler can mitigate some of these expenses by opting to camp, cook their own meals, or focus on free activities. However, if you want to experience everything that this beautiful country has to offer, that experience will come with a price. 

This doesn’t mean you can’t find places to stay in Reykjavik on budget. To reduce costs, thrifty travelers can choose to get a tent, rent a camper van, or stay in hostels.


While there are plenty of upscale hotels in Reykjavik, you shouldn’t expect five-star accommodations that you may find in a larger city. A comfortable hotel room downtown will set you back about a few hundred dollars per night, with a few exceptions scattered about. 


One alternative to the expensive hotels found in the city center are the hostels strewn about Reykjavik. Many hostels have extras such as trips to see the Aurora Borealis, on-site restaurants, and self-service kitchens, all of which contribute to making the trip more backpacker-friendly. 

Younger travelers looking to party and explore the nightlife can opt for youth hostels. Conversely, they can choose boutique Reykjavik hostels that offer a little more peace and quiet, and an opportunity to unwind after a long day. 


With the rise of peer-to-peer couch sharing services, you can avoid some of the pricier hotels by looking into the various vacation cabins located throughout the city.

However, don’t expect a large discount, as many of the more sought-after spots can rival or exceed a comparable hotel room. Note that other vacationers may book out even the lowest end guesthouse in advance by several months. 

Campsites (Laugardalur Park) 

The most cost-effective accommodation and best alternative (though we may be biased here) is to choose a campsite by renting a campervan. The Laugardalur campsite is an excellent option for those looking for inexpensive lodging in central Reykjavik. The camp is a 20-minute leisurely walk from the city center and is located next to the magnificent Laugardalur swimming pool and recreational area. 

Parking, utilities for campervans, toilets, washing machines, internet, catering facilities, and 24-hour security are all available on the site. You’re even a short walk from The Laugardalur Petting Zoo and Family Park, making it a perfect starting point for families with children.

Plan Your Next Adventure with Rent.is

A camper van makes the most sense if you want the most flexible choice of where to stay in Reykjavik while exploring Iceland at your own pace. You will enjoy the most beautiful views that the country has to offer while taking your base camp with you. Contact Rent.is to find the best Iceland camper rental for your needs. We take pride in providing our guests with first-class accommodations that allow them to build lasting memories.

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