Budget Accommodation in Iceland: Hostels, Guesthouses and Camping

Iceland is an expensive country by almost any measure. Accommodation costs in particular can surprise travellers who are used to budget-friendly destinations elsewhere in Europe. The good news is that the budget tier in Iceland is more developed than it used to be, and some specific strategies cut costs considerably without sacrificing too much comfort.

Hostels in Reykjavík

The capital has Iceland’s most competitive hostel market. Three properties stand out at the budget end:

Kex Hostel (Skúlagata, central Reykjavík) is housed in a former biscuit factory and has a well-regarded bar that attracts non-guests as much as residents. Dorm beds run approximately ISK 6,500 per person as of 2026; private rooms from approximately ISK 20,000. The bar makes this a livelier option — not ideal if you want early mornings.

Loft Hostel (Bankastræti) occupies the top floors of a central building with rooftop views. Dorm beds start at approximately ISK 6,000. The location is hard to beat for access to the city centre, and the shared kitchen is well equipped.

Reykjavík Campsite in Laugardalur is the lowest-cost option in the capital at approximately ISK 2,800 per person per night. The site has good facilities including hot showers and a cooking area. It operates May through September. The location is 3 km from the city centre — walkable or a short bus ride.

HI Iceland Hostels

HI Iceland operates around 35 properties across the country, making them by far the widest-reaching budget accommodation network outside Reykjavík. Properties range from standalone buildings in towns like Akureyri and Egilsstaðir to smaller hut-like facilities in remote areas.

HI membership costs approximately ISK 4,500 per year (as of 2026) and saves ISK 700 per night — so it breaks even after around seven nights. For a Ring Road trip, it pays for itself easily.

Most HI properties offer both dorm beds (ISK 5,500–8,500) and private rooms (ISK 18,000–30,000 depending on location). Booking directly through the HI Iceland website typically gives the best rates. In summer, even HI hostels in less-visited towns should be booked several weeks ahead.

The Camping Card

The Camping Card is Iceland’s most useful tool for budget travel and covers 28 nights at 42 participating campsites across the country. It costs approximately ISK 21,900 as of 2026 — roughly ISK 780 per night if you use all 28 nights.

The card is available from the website camping.is and from some campsite reception desks. The participating sites include campsites at most of the major Ring Road towns: Vík, Höfn, Egilsstaðir, Akureyri, and others.

For a 10–14 day Ring Road trip camping most nights, the Camping Card makes the accommodation budget far more predictable. It does not cover every campsite in Iceland — some independently run sites charge separately — but covers enough of the main route to be worthwhile for most itineraries.

Note that campsites along the South Coast, particularly near Skógafoss and at the glacier lagoon, can become very crowded in July and August. Arriving before 18:00 to secure a pitch is advisable.

Budget Guesthouses

Outside Reykjavík, guesthouses (gistiheimili) in the ISK 14,000–26,000 range offer a better experience than many hostels for solo travellers or couples who prefer a private room.

Guesthouse Baldursbrá in Reykjavík’s 105 district offers private rooms from approximately ISK 14,000 — among the more affordable private rooms in the capital. Shared bathrooms at the lower price point, en-suite at the top of the range.

Rural guesthouses along the Ring Road typically run ISK 18,000–26,000 for a private room with shared bathroom, often including breakfast. Breakfast is worth factoring into price comparisons — a typical Icelandic breakfast with bread, cold cuts, skyr, and coffee in a café costs approximately ISK 2,500–4,000 in 2026.

Guesthouse Steig near Seljalandsfoss on the South Coast charges approximately ISK 20,000–28,000 and is well positioned for the waterfall stops that anchor the first full day of most Ring Road trips.

What Drives Prices Up — And How to Avoid It

The single biggest factor in Iceland accommodation costs is season. Hotels and guesthouses in July and August charge peak rates that are often 40–60% above what the same rooms cost in May or September.

A mid-range hotel charging ISK 45,000 in July may be available at ISK 28,000 in May. The trade-off: May has unpredictable weather, some interior roads are still closed, and the Westfjords and Highlands may have limited access. September is generally better: most roads are still open, the autumn colours are good, and the first aurora of the season appears.

Booking late in peak summer — arriving in July without a reservation — is a reliable way to pay inflated rates or find no availability at all. The budget tier fills as fast as mid-range and luxury properties in high season.

Practical Tips

• Cook your own food: Iceland’s supermarkets (Bónus and Krónan are the cheapest chains) allow self-catering from most hostel and campsite kitchens. This can cut daily food spend by ISK 3,000–6,000.
• Book directly: Some smaller guesthouses offer 5–10% off direct bookings. It is worth calling ahead for multi-night stays.
• Check what is included: Breakfast included versus excluded shifts the true cost comparison considerably. Rural guesthouses often bundle it; Reykjavík hostels rarely do.
• Avoid Saturdays in Reykjavík: Weekend rates in the capital spike. If your itinerary is flexible, arriving Sunday–Thursday saves money.

For a broader picture of Iceland’s accommodation options across all budgets, see our complete Iceland hotels guide.

Get travel insurance for Iceland — policies covering glacier hikes, F-road driving, and volcanic disruption.

Pre-book Keflavík airport transfers — Flybus and private options for the 45-minute route to Reykjavík.

Pick up an Iceland eSIM before you travel — works on arrival and covers most of the Ring Road.

Related Guides

• Best hotels in Iceland — Full overview of accommodation options from hostels to luxury
• Camping in Iceland — The Camping Card, best campsites, and wild camping rules
• Iceland campervan guide — Renting a campervan as an alternative to hotels
• Iceland budget guide — Full cost breakdown covering accommodation, food, transport, and activities
• Ring Road accommodation guide — Accommodation options along the full Ring Road circuit