Guesthouses in Iceland: The Local Way to Stay

Iceland’s guesthouses occupy a category that sits between the international hotel chains and a friend’s spare room. At their best, they offer home-cooked breakfasts, owners who have lived in the area for decades, real-time intelligence on road and weather conditions, and prices that undercut hotels by 20–40%.

At their worst, they are overpriced rooms with thin walls and a shared bathroom. The range is wide. What follows covers the standouts by region.

Why Guesthouses Often Beat Hotels in Iceland

The case for choosing a gistiheimili over a hotel in Iceland is strongest outside the capital. In rural areas, the practical knowledge held by guesthouse owners is genuinely useful in a way it rarely is at a city hotel.

An owner in Skagafjörður can tell you whether the highland road to Hveravellir is passable with a 2WD or whether the forecast aurora tonight is actually worth getting up for at 2am. A hotel reception desk in Reykjavík cannot.

Breakfast is the other factor. Many rural guesthouses include it in the rate — bread from the local bakery, skyr, smoked trout or lamb, coffee refills. In a country where a café breakfast costs ISK 2,500–4,000, this has real financial weight.

Reykjavík

Urban guesthouses in the capital tend to be less locally flavoured than rural ones, but they offer better value than the mid-range hotels.

Guesthouse Baldursbrá in the 105 district (a 10-minute walk from the old harbour) offers private rooms from approximately ISK 14,000 as of 2026 for a shared-bathroom room. En-suite rooms run approximately ISK 18,000–20,000. Simple, clean, and family-run — the hosts speak good English and are helpful with Aurora forecasts and Golden Circle logistics.

Guesthouse Sunna near Hallgrímskirkja offers slightly more polished accommodation with private rooms from approximately ISK 18,000–25,000. The church-side location is excellent for exploring the city on foot.

For anyone based in Reykjavík for more than one night, staying at a guesthouse rather than a hostel gives enough extra quiet and privacy to make a meaningful difference to sleep quality, which matters when you are getting up at 2am for aurora.

South Coast

The South Coast corridor between Selfoss and Vík has seen significant growth in accommodation over the past decade. Most of the new builds are hotels, but several established guesthouses remain good-value options.

Guesthouse Steig sits near Seljalandsfoss and Gljúfrabúi waterfall — two of the South Coast’s most visited stops. Rates run approximately ISK 20,000–28,000 per night as of 2026, typically with breakfast included. The morning before the day-trippers arrive from Reykjavík is the best time to walk behind Seljalandsfoss, and staying here rather than day-tripping makes that timing easy.

Rural guesthouses south of Vík, near Reynisfjara black sand beach, run similarly — ISK 18,000–26,000. The Mýrdalsjökull glacier access from here makes an early start worthwhile.

North Iceland

North Iceland’s guesthouse network is less dense than the south but well placed for the main attractions. Akureyri, Húsavík, and the Mývatn area are the three focal points.

Guesthouse Stóra-Giljá near Varmahlíð in the Skagafjörður valley offers a farmstay-feel guesthouse at approximately ISK 22,000–30,000 per night. Horse country surrounds it — the Hestasport riding centre is a short drive away. Breakfast included, and the hosts have connections across the northern interior that make last-minute day trip planning straightforward.

In Akureyri itself, smaller guesthouses typically run ISK 20,000–30,000 for a private room — somewhat cheaper than Hotel Kea but with less central locations. Check proximity to parking if you are driving.

Near Húsavík, several guesthouses cater specifically to whale-watching visitors, with proximity to the harbour. Rates run ISK 18,000–26,000. Early departures for whale-watching trips (typically 09:00) are much easier from here than from Akureyri.

Westfjords

The Westfjords (Vestfirðir) are Iceland’s most remote region — a large peninsula of steep fjords in the northwest that most Ring Road itineraries skip entirely. For those who visit, accommodation options are limited but include several good guesthouses.

Gamla Gistiheimilið in Ísafjörður — the main town of the Westfjords — occupies a historic timber building in the old quarter. Rates run approximately ISK 18,000–26,000 per night as of 2026. Ísafjörður is small enough to walk entirely, and the old fishing quarter has more character than most Icelandic towns.

Smaller guesthouses along the fjord roads typically charge ISK 16,000–22,000. Cash is sometimes preferred at more remote properties — confirm when booking.

The Westfjords add at least 2–3 days to a Ring Road itinerary and require a flight (from Reykjavík domestic airport) or a long drive from the Ring Road junction. The payoff is genuine solitude and landscapes that see a fraction of the summer visitor numbers on the South Coast.

What to Expect

A few practical points about Icelandic guesthouses that are not always made clear in booking descriptions:

Shared bathrooms: Common at prices below ISK 20,000. The ratio of bathrooms to rooms varies — two shared bathrooms for 10 rooms is typical. This is worth factoring in if there are early morning plans.

No on-site bar: Most rural guesthouses do not have a bar. Self-catering facilities (kettle, sometimes a full kitchen) are common. Bottle shops in rural Iceland are sparse — stock up in Reykjavík or major towns if needed.

Cash: Some rural properties prefer cash, though all accept cards. It is worth carrying ISK 5,000–10,000 in cash when touring outside main towns.

Aurora wake-up calls: Many guesthouses in areas with good aurora potential (North Iceland, the Interior, East Iceland) offer this. Ask when checking in — it is often not advertised but routinely provided.

For budget hostel and camping options, see our budget accommodation guide. For a full overview of accommodation types, see our Iceland hotels overview.

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

• Farmstays in Iceland — Staying on working farms: a more immersive alternative to guesthouses
• Ring Road accommodation guide — Guesthouses and hotels along the complete Ring Road circuit
• Budget accommodation in Iceland — Hostels, camping, and the cheapest accommodation options
• Reykjavík neighbourhoods guide — Choosing where to stay in the capital
• Iceland budget guide — How accommodation fits into the full Iceland cost picture