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It’s no secret that Iceland can be pretty expensive to visit, but that shouldn’t deter you from visiting. There are a few ways to save money, like staying in hostels in Iceland.

Iceland is often dubbed the ‘the land of ice and fire’ because of its polarizing landscapes of glaciers and bubbling volcanoes.

Yep. In this Nordic country, you’ll see stunning places you must visit, like the famous Blue Lagoon, mind-blowing waterfalls, and red and black sand beaches. It’s no wonder it’s on so many people’s bucket lists.

This is the guide if you’re a budget traveler looking for the top Iceland hostels.

Best Iceland Hostels

Here is a quick round-up of the best hostels in Iceland.

Kex Hostel in Iceland
Image from Facebook

KEX Hostel, Reykjavík

The KEX Hostel is one of the best places to stay in the Iceland capital of Reykjavik. Interestingly, KEX is the Icelandic word for ‘biscuit’ because it was formerly a biscuit factory.

As a result, the whole place has an industrial and rustic feel that carries on into the dorm rooms. There are female-only dorms and mixed rooms that each come with a seating area and shared bathrooms. There are also private rooms which offer more space.

But you won’t want to spend much time cooped up in your room as this hostel’s communal spaces are brilliant. Here you’ll find a barber, a library, and a multi-functional hall decorated to look like a boxing gym.

While there are two guest kitchens, the buffet breakfast, and on-site restaurant assure you won’t have to cook much during your stay. The in-house Drinx Bar is ideal for ordering sundowners or enjoying a live musical event every Thursday and Saturday.

Grundarfjördur HI Hostel in Iceland
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Grundarfjördur HI Hostel, Grundarfjördur

Grundarfjördur Hostel is located in the small town of the same name west of Iceland in the Snæfellsnes peninsula.

Against all of the lush fields, these bright red and green barns stand out. Inside, you’ll find a homely space decorated with equally colorful decor and communal kitchen facilities. If you plan on driving in Iceland, you’ll be happy to know that the hostel offers free parking.

While Grundarfjördur Hostel is in a small fishing town, the natural landscapes surrounding it attract most visitors. Over here, you’re in a prime location to visit the highest waterfall in the west of Iceland — Grundarfoss Waterfall. And, of course, you’ll be steps away from the iconic Kirkjufell mountain and Kirkjufellfoss waterfall.

Many outdoor activities include visiting the harbor, hiking, and kayaking.

The Barn Hostel in Iceland
Image from TripAdvisor

The Barn Hostel, Vík

The Barn Hostel in Vík is my favorite accommodation in the area thanks to its modern take on, well, a barn, and its excellent lounge and social vibe and ambiance. The exterior and interior are modern-rustic, dark, and wood-covered.

You can choose between a shared dorm or the eight private rooms available when staying here. Keeping with the hostel’s theme, these rooms are modern and simple, with wood flooring.

While the dorms have shared bathrooms, each bunk bed has a curtain for privacy and to block out any light when sleeping.

The communal spaces at this hostel offer excellent facilities like a lounge, a bar, a communal kitchen, and personal lockers. There’s also free Wi-Fi to help you plan your trips to the many cool South Coast attractions while here.

These highlights include Reynisfjara Black Sand Beach (which is just a few minutes driving south of the hostel), Mýrdalsjökull Glacier, and Katla Volcano.

Start Keflavik in Iceland
Image from TripAdvisor

Start Keflavík Airport

If you enter Iceland, there’s a good chance you’ll enter through Keflavík Airport. And, if you have an early (or late) flight into the country, Start Keflavík Airport may be the best hostel for the night to sleep off the jetlag for a bit.

The rooms are kept simple, with beds, a dining area, and communal bathrooms. Private rooms are available if needed, but the kitchen, terrace, lounge, and laundry facilities are communal.

Another perk of staying here is the complimentary buffet breakfast each morning, where you can fill up on coffee and cereal. You can visit the kiosk to buy some if you want snacks.

If you’re looking for something else to hit the spot, a few restaurants are just a short walk from the hostel. Speaking of nearby spots, not too far from Keflavík and only a 20-minute drive, you’ll find the famous Blue Lagoon geothermal spa.

Here, you can warm up in winter or just soak away the last bits of holiday stress. The hostel can even assist you in making a reservation.

Midgard Base Camp in Iceland
Image from TripAdvisor

Midgard Base Camp, Hvolsvöllur

If you’re an adventure traveler, Midgard Base Camp is the place to be. It is in a great location near the main tourist attractions in the south, like the Seljalandsfoss waterfall, the Eyjafjallajökull volcano, and more.

The hostel has a super friendly atmosphere and is decorated with fairy lights and comfortable furniture. Rooms, however, are kept minimal.

If you choose a dorm room, you’ll get your very own pod kitted with power outlets, black-out curtains, and a lamp. Family rooms and their double or twin rooms have private bathrooms.

The Midgard Base Camp also has some great facilities, like a rooftop hot tub, sauna, and garden. The on-site restaurant serves continental meals as well as vegan and vegetarian dishes.

Swing by the bar between four pm to six pm for some fun drinks around happy hour to kick off the night. 

Reykjavik Golden Sunset

Best Hostels in Reykjavík

Reykjavík is only Iceland’s tip of the iceberg, but it is a must-visit destination as the capital city. Depending on what time of the year you visit, you’ll have plenty of things to do, like whale watching or many music festivals to attend.

Of course, the city is also an ideal place to catch a glimpse of the northern lights.

Bus Hostel in Iceland
Image from TripAdvisor

Bus Hostel

The Bus Hostel is the best hostel to stay at the beginning of your trip or if you plan on taking a few day trips from Reykjavík. This is because it’s located right at the Reykjavík bus terminal and offers many trips or assistance to tours in the area.

The no-fuss sleeping quarters are spacious, with dorm rooms holding 20 to four bunk beds. In these mixed dorms, guests can access shared bathrooms, a dining area, and laundry facilities.

However, you can expect a queen bed and city views if you prefer a private room. Unfortunately, you’ll still need to share bathrooms with others.

The Bus Hostel has great entertainment facilities like a TV room, board games, a bar, and a restaurant on-site. But there are also many attractions close by, like restaurants, cafes, and museums.

Hostel B47 in Iceland
Image from TripAdvisor

Hostel B47

Hostel B47 is in the heart of the capital. This means it’s just a short distance from the city’s main tourist attractions, like the National Museum of Iceland and Rainbow Street.

It’s also close to some more off-beat places, like the Icelandic Punk Museum and Stúdentakjallarinn (The Student’s Basement), where you can get schooled on all types of music.

Rooms are kept simple with four to 12-bed shared dorms ranging from mixed dorms to female-only rooms. You’ll find safety deposit boxes, power sockets, and reading lights for each guest in these rooms.

There are no privacy curtains for each bed, but the room windows do have black-out curtains. There are no single private rooms but private double rooms and family rooms with shared bathrooms.

The open spaces include a dining area, a kitchen, a lounge, and a terrace. Breakfast is served daily, with vegan and vegetarian alternatives also available. There is also free parking available if needed.

Loft Bar Cafe Hostel in Iceland
Image from TripAdvisor

Loft – HI Hostel & Bar

The Loft HI hostel is best for digital nomads looking for a place in the hubbub of the city. It sits just off Laugavegur Street, the city’s main shopping street, which means you’ll be close to bars, restaurants, and most of the action throughout the day.

There is a range of sleeping quarters, from eight to four-bedded dormitories to private rooms. Dorms have lockers, night lights, and bedside sockets to charge your devices.

They also have in-room shared bathrooms. Private rooms are much more spacious with a tiny desk, double bed, private bathroom, and great city views.

This eco-hostel takes taking care of the earth and your social well-being very seriously. Not only does it have a rooftop terrace, accessible facilities, a bar, and a restaurant on-site, but it also hosts free weekly social events.

And, if you’re looking at taking any tours, you can ask the friendly staff for assistance.

Dalur Hostel in Iceland
Image from TripAdvisor

Dalur – HI Hostel & Cafe

This eco-friendly Dalur HI Hostel is in the Reykjavík neighborhood of Laugardalur. The neighborhood is home to various thermal baths, like the Laugardalslaug swimming pool right next door.

The quiet area and baths mean you’ll get a peaceful break from the city while not too far from the capital hub.

Guests describe the dorm room beds as comfortable, with a power outlet and light available. Unfortunately, these beds have no privacy curtains, but private rooms with private bathrooms are also available.

There are two communal kitchens where you can prepare any meal. If you’re not the cooking type, the on-site Dalur Cafe is a great place to pick up a quick bite and fairtrade coffee & tea. There are also barbecue facilities if you’re visiting in the warmer months.

Remote Iceland Road

Best Hostels in South Iceland

On the south side, Iceland’s Golden Circle is the country’s most scenic route. It covers beautiful natural sights like black sand beaches, the Blue Lagoon, waterfalls, and active geysers.

The Freezer Hostel in Iceland
Image from TripAdvisor

The Freezer, Snæfellsbær

The Freezer is an award-winning southwestern hostel famous for being a former fish factory near the Snæfellsjökull Glacier National Park. It has quirky decor with nautical elements as a funny call-back to its previous life.

Each dorm room also has a nautical and artsy theme with simple bunk beds and shared bathrooms. There are also smaller rooms with twin beds and double beds.

But you probably won’t be spending much time in your rooms anyway. While this social hostel was a fish factory, its new life seems to be in the direction of the arts and community, with regular programs like karaoke nights, pub quizzes, live music, and stand-up comedy shows.

Its lounge and tiki bar are also great places to socialize. If that’s not your cup of tea, they also host book exchanges, have loads of board games, and help with tours.

Heradsskolinn Hostel in Iceland
Image from TripAdvisor

Héraðsskólinn Historic Guesthouse, Laugarvatn

This hostel in Laugarvatn is by far one of my absolute favorite places to stay in all of Iceland. It sits in the heart of the Golden Circle, just 60 minutes away from Reykjavik, making it a great hub to see Thingvellir, Gullfoss, Geysir, and many other natural wonders nearby.

Built in 1928 as a school, the Héraðsskólinn Historic Guesthouse was practically the first building to be constructed on that plot of land next to the lake – serving as the catalyst to develop a small village where art, education, and culture could thrive.

The school was designed by Guðjón Samúelsson, who many consider the foremost Icelandic architect. He also designed the iconic Hallgrímskirkja, the landmark church that looks over downtown Reykjavik.

Besides the historic significance of this gorgeous building, the hostel in itself also lives up to the charm and importance of this place. While the hostel offers all the modern amenities you would expect, it still keeps that charm of the past through old class photos, mementos, and vintage furniture.

Still, the rooms – which vary from private rooms to single rooms, double rooms, family rooms, and bunk bed rooms, are nicely decorated in a minimalist aesthetic that is commonly found in Iceland.

If you’re willing to splurge a bit, go for the private rooms, as they offer more privacy, a private bathroom, and easy access to their large balconies that serve as an ideal spot to watch the northern lights. For the rooms with shared bathrooms, there are plenty of bathrooms throughout the hostel, and they are always kept clean and tidy.

While there are a few restaurants in the small town, the hostel also has its own bar and restaurant, should you want to have a relaxing night in its calm atmosphere. Lastly, should you want to relax further, the Laugarvatn Fontana hot springs and spa are within walking distance.

Hofn Hostel in Iceland
Image from TripAdvisor

Höfn Hostel, Höfn

Set in another fishing town, Höfn is a quiet area close to many natural attractions like the Vatnajökull Glacier, Vestrahorn mountain peak, and the Hoffell Hot Tubs. The town is so tiny that Höfn Hostel is actually the only hostel in it. Still, it is a great place to stay and a hostel I’ve repeatedly used while in Iceland.

This eco-friendly hostel is small but has everything you need for a comfortable stay, including guests with disabilities. It has a TV lounge, dining area, and a shared kitchen.

But, if you’re not in the mood for cooking, you can take a short walk to the town’s many cafes and restaurants for a bite. Each morning between May and September, the hostel also serves breakfast.

While there are dormitory rooms, there are mainly private rooms or rooms for small groups, which is great for friends traveling together. These rooms have shared bathrooms, heating, reading lamps, and power sockets to recharge devices.

Paradise Cave Hostel in Iceland
Image from TripAdvisor

Paradise Cave Hostel, Seljaland

While many places in Iceland are beautiful, few can match the whimsical charm of this friendly place on the south coast. That is because this townhouse hostel has the breathtaking Seljalandfoss waterfall right in its backyard.

Each room at Paradise Cave Hostel has a garden view whether you stay in the 12-bedroom dorm rooms or the private double rooms. These rooms come with bed lamps, power sockets, and shared bathrooms.

There is a shared kitchen with 24/7 access to fresh coffee and tea. Each morning you can enjoy a buffet breakfast; at night, the hostel offers beer and wine.

Of course, it would be a waste to have a waterfall in your backyard and not explore the landscapes. That is why the hostel aids you with any tours you’d want to take and can even help you rent a car to explore for yourself.

Icelandic Town in the Snow

Best Hostels in North Iceland

While the south has the Golden Circle, the north has the Diamond Circle, which covers sights like glacial waterfalls, fishing towns, fjords, and canyons. Of course, on this side of Iceland, you’ll have a good chance of seeing the Northern Lights, so visit here in winter.

Akureyri Hostel in Iceland
Image from TripAdvisor

Akureyri HI Hostel, Akureyri

Akureyri is a good base if you plan on visiting Askja, Dettifoss waterfall, the volcanic lake of Mývatn, or any other natural wonder in the north. It is the second biggest town in Iceland, so you’ll have plenty to do and see while here.

The Akureyri Hostel is a family-owned hostel that sits close to the Glerá River. It remains simple inside with minimal decor but spacious rooms with a seating and dining area. Dorm rooms sleep up to four guests, but private rooms are also for small groups or couples.

Hafnarstraeti Hostel in Iceland
Image from TripAdvisor

Hafnarstræti Hostel, Akureyri

Hafnarstræti Hostel is a modern hostel remnant of the popular Galaxy Pod Hostel, which looks like it’s straight out of an episode of Star Trek. While it’s not uncommon to see these pods in places like Japan, these are quite novel in Iceland.

These sleeping pods allow you to choose between a single or double bed. Each pod comes with headphones, a safety deposit box, and Chromecast access to watch whatever you want on the screens inside.

The hostel has a shared kitchen, shops, and even an on-site gift shop. But, since it has such a great location, you can find many cafes, restaurants, and more shopping opportunities within walking distance.

Husavik Green Hostel in Iceland
Image from TripAdvisor

Húsavík Green Hostel, Húsavík

Húsavík is a small town most popular for whale watching in the summer months. The accommodation is also quaint and is a short distance from the bay. In winter, guests can enjoy skiing in the area.

And, if you decide to visit, stay at the sustainable Húsavík Green Hostel. Like the town, this accommodation is small but friendly to all guests. There are three or four-person dorms, but consider the private rooms for a less cramped stay.

Each room has access to the patio and terrace, shared bathrooms, and a lot of storage space. You’ll still get access to Wi-Fi, but because the hostel’s biggest draw is the outdoors, there aren’t many on-site activities to encourage guests to enjoy the beautiful landscapes.

Small Icelandic Town in Snaefelsness

Which Cozy Hostel in Iceland Will You Stay in?

So, there you have it, some of the best hostels in Iceland, whether you’re visiting in the north, south, or just staying in the capital. Oftentimes these accommodations have dorms, but if you want more privacy, you can always request private rooms or family rooms in some cases.

Of course, all the hostels have something different that helps them stand out from the rest, but the one thing they have in common is friendly hospitality — which is the best part of any stay, don’t you think?

Best Hostels in Iceland - Dorms, Private Rooms & More
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