Last Updated: 5/11/23 | May 11th, 2023
Iceland is one of the most beautiful, most majestic countries in the world. With dazzling waterfalls, otherworldly lava fields, black sand beaches, and towering volcanic peaks, it’s no surprise this island is beloved by all who visit. I’ve never met any who didn’t love the country.
That beauty, however, comes at a price. Iceland is very expensive. It doesn’t take much to blow your budget here, even if you’re a frugal traveler like me.
Fortunately, the Land of Fire and Ice has a well-worn backpacker trail dotted with hostels that can make your visit more affordable.
Before we dive in, there are a lot of things to consider when selecting a hostel. After over a decade of backpacking around the world, I’ve learned what makes a good hostel great. The top four factors are:
1. Location – Iceland is spread out, and it can take some time to get around. Pick a place that is near the sites you want to see and/or the nightlife you want to experience. All the hostels listed here are centrally located.
2. Price – In Iceland, you really get what you pay for, so if you go with a really cheap hostel, you’re probably going to get one that is cramped and doesn’t offer great service.
3. Amenities – Most hostels offer free Wi-Fi, and some even include free breakfast, but if you want more than that, do your research in order to find one that best meets your needs!
4. Staff – All the hostels listed here have an amazing staff! They are super friendly and knowledgeable. Even if you don’t stay at one of the places listed below, look up reviews to ensure you end up somewhere where the staff are helpful and friendly! They can make or break a hostel!
To help you plan your trip, below is my list of the best hostels in Iceland. They all offer a welcome respite and a cozy and friendly place to lay your weary head and hang out with fellow travelers — all while keeping your budget intact.
If you don’t want to read the whole list, the following are the best in each category:
Want more specifics? Here’s my comprehensive list of the best hostels in Iceland:
Price (per night)
- $ = Under 5,000 ISK
- $$ = 5,000-7,000 ISK
- $$$ = Over 7,000 ISK
1. KEX Hostel (Reykjavik)
This 200-person hostel is set in a former biscuit factory (kex is the Icelandic word for “biscuit” or “cookie”). The huge Scandi-industrial-chic space has myriad types of rooms: mixed dorms, female-only dorms, private double rooms, and rooms that can accommodate families. The dorms have lockers but you’ll need to bring your own lock.
It’s a very social hostel and the bar area makes it easy to meet people. The complex is also the long-term home of artists and designers, adding a hip, creative element to the place. There’s a heated outdoor terrace, as well as kitchen facilities. It’s also centrally located making it easy to get around the city.
KEX at a glance:
- Hip design and décor
- Unusually comfortable home-away-from-home vibe
- In-house tour experts for Reykjavik travel advice
Beds from 4,140 ISK , private rooms from 16,000 ISK.
2. The Freezer (Snæfellsbær)
Located in Snæfellsbær in western Iceland, The Freezer isn’t big: it has four rooms and can accommodate just 22 travelers. But what it lacks in size it makes up for in fun. This is an artsy, laid-back backpacker hostel where it’s easy to meet people and socialize. The in-house tiki bar is lively, particularly during the 6–8pm happy hour. Common areas have ample board games, and there are regularly scheduled events like film screenings, pub quizzes, and live music.
The beds aren’t anything special but the rooms are colorful and there’s a kitchen if you want to cook. Linen is included in the price too.
The Freezer at a glance:
- Awesome on-site tiki bar with a great happy hour
- Friendly vibe
- Nightly scheduled events
Beds from 3,850 ISK, private rooms from 22,000 ISK.
3. Akureyri Backpackers (Akureyri)
Set in the center of town near bars, restaurants, and coffee spots, this hostel is about as lively a place as you’ll find in the northern town of Akureyri. The in-house bar serves up a few different local brews on tap and also a menu of non-Icelandic comfort food/tummy fillers like burgers and nachos.
There are 103 beds on three floors, consisting of mixed dorms, single-gender dorms, and private rooms. The dorm beds here are basic and not super comfy but there are lockers and the rooms are relatively spacious. The kitchen is fully equipped and there’s even a sauna!
Akureyri Backpackers at a glance:
- On-site sauna
- Lively bar on premises
- Fun vibe
Beds from 6,400 4,600 ISK, private rooms from 15,000 ISK.
4. Bus Hostel (Reykjavik)
Set in a quiet residential neighborhood about a 15-minute walk from central Reykjavik, this modern hostel is neither housed in an old bus nor does it have a bus theme, despite the name. It is, though, very close to the main bus station, making it very convenient for coming from and going to the airport.
Rooms consist of mixed dorms, female-only dorms, and private rooms. Linens are included too, a not-so-typical perk for Icelandic hostels. The on-site bar, Buzz, is a fun place to sample one or all of the four beers on tap. The bathrooms are modern and clean, and the shower pressure is excellent. The kitchen is decent, though it can get busy, so if you want to cook make sure you get in there early.
Bus Hostel at a glance:
- Convenient location near the main bus station for easy airport transfer
- Laid-back vibe
- Great in-house bar
Beds from 6,800 4,000 ISK, private rooms from 18,000 ISK.
5. Hafnarstræti Hostel (Akureyri)
This modern hostel is made up of capsule rooms, just in case you wanted a sci-fi experience while in Iceland. Instead of a regular bunk bed, you’ll get your own pod that seals shut, allowing you to get a decent sleep without the common dorm-room distractions. The pods are actually quite spacious and have plugs, storage space, and a video screen. The beds are comfortable, and the bathrooms are super clean too.
When you’re not in your pod, hang out in the spacious common room and play board games and billiards with fellow travelers.
Hafnarstræti Hostel at a glance:
- Quiet atmosphere
- Nice common area
- Comfortable and cozy pod rooms
Beds from 7,500 ISK, capsule beds from 13,000 ISK.
6. Loft HI Hostel (Reykjavik)
Once voted the best hostel on the planet, this Reykjavik spot has a lot to live up to. And it doesn’t disappoint. Dorms and private rooms are nice enough that you’ll love chilling out in the room for a while. The dorm bunks, while basic, are comfy, and the mattresses are thick.
Some rooms have nice city views. If not, head up to the rooftop deck; it’s a lively and social place to meet other travelers. The hostel regularly puts on evening events, such as live music and stand-up comedy, and the staff go above and beyond if you have questions or need help planning your trip.
Loft HI Hostel Name at a glance:
- Roof deck with great views
- Regular evening events (live music, comedy)
- Comfortable rooms
Beds from 7,500 ISK, private rooms from 32,500 ISK.
7. Lækur Hostel (Reykjavik)
Lækur is named for the thermal springs that stream beside it. There are rooms aplenty, including single, double, and triple private rooms as well as eight-bed dorms. The beds are comfortable, though the bunks don’t have curtains (they have their own plug and lights though). The chic bathrooms are spotless, and the large, shared kitchen is big and equipped enough that you may be tempted to cook your own food every night, though the Nordic-themed café has some good offerings too.
Lækur Hostel at a glance:
- Cool, Nordic-themed café
- Great breakfast
- Clean and chic design
Beds from 8,600 ISK.
8. Grundarfjördur Hostel (Grundarfjördur)
Grundarfjördur Hostel is a nice base for exploring Snæfellsnes Glacier National Park, a place with supposedly magical properties. The hostel is dominated by a two-story red building — the reception desk and lobby — but has sleeping quarters scattered throughout the small village.
The dorm bunks are basic but comfy, the rooms are clean and spacious, and there’s a kitchen if you want to cook. The painting and design are a bit dated, but the hostel itself is comfortable and cozy and in a great location. The views here are excellent too (you can see the famous Kirkjufell, or Church Mountain, from some of the rooms).
Grundarfjördur Hostel at a glance:
- Good for couples and families
- Beautiful location
- Nice common room
Twin private rooms from 14,300 ISK, quad private rooms from 20,000 ISK. (Note: dorm rooms can currently only be booked as private rooms).
9. Hafaldan HI Hostel – Old Hospital (Hafaldan)
As the name suggests, this cozy hostel is set in an erstwhile medical facility. There’s a spa (with a sauna!) and they have extra comfy rooms.
They have dorms as well as two-person rooms, four-bed private rooms — some with shared bathrooms and others with private bathrooms — and even a private apartment. While the beds in the private room are decent, the dorm beds are pretty basic. That said, the rooms are clean, and the showers have excellent pressure (the bathrooms are spotless too).
Hafaldan HI Hostel – Old Hospital at a glance:
- On-site spa with sauna
- Great location
- Friendly staff
Beds from 5,400 ISK, private rooms from 10,500 ISK.
Iceland has a ton of hostels and, throughout the country, I was always amazed at how incredible they were. Even in small little towns, you could sometimes find a really modern, clean, and comfy hostel. And, given the country’s popularity, they are often full of other travelers so you’re always meeting people.
Iceland may be pricey but the hostels in the country offer you one of the best ways to save money while meeting other travelers. Don’t avoid them when you visit, even if you’re over dorms and want your own room!
Get the In-Depth Budget Guide to Iceland!
Want to plan the perfect trip to Iceland? Check out my comprehensive guide to Iceland written for budget travelers like you! It cuts out the fluff found in other guides and gets straight to the practical information you need. You’ll find suggested itineraries, tips, budgets, ways to save money, on and off the beaten path things to see and do, and my favorite non-touristy restaurants, markets, bars, transportation tips, and much more! Click here to learn more and get your copy today.
Book Your Trip to Iceland: Logistical Tips and Tricks
Book Your Flight
Use Skyscanner to find a cheap flight. They are my favorite search engine because they search websites and airlines around the globe so you always know no stone is left unturned!
Book Your Accommodation
You can book your hostel with Hostelworld as they have the biggest inventory and best deals. If you want to stay somewhere other than a hostel, use Booking.com as they consistently return the cheapest rates for guesthouses and cheap hotels.
Don’t Forget Travel Insurance
Travel insurance will protect you against illness, injury, theft, and cancellations. It’s comprehensive protection in case anything goes wrong. I never go on a trip without it as I’ve had to use it many times in the past. My favorite companies that offer the best service and value are:
- Safety Wing (for everyone below 70)
- Insure My Trip (for those over 70)
- Medjet (for additional repatriation coverage)
Looking for the Best Companies to Save Money With?
Check out my resource page for the best companies to use when you travel. I list all the ones I use to save money when I’m on the road. They will save you money when you travel too.
Want More Information on Iceland?
Be sure to visit our robust destination guide to Iceland for even more planning tips!