Sleep Cheap, Drive Far: Budget-Friendly Iceland

08/04/2025

Hi there!
We're DuoTravel Monkeys, a travel couple who had the privilege of spending half a year in Iceland. During our stay, we worked, explored this breathtaking island, and finally fulfilled a dream — a road trip all around Iceland.

Although we managed to save up a decent amount during our time there, we quickly realized during the planning phase that Iceland can be seriously expensive — especially when it comes to accommodation. That's why we made it a priority to find places to stay that wouldn't break the bank, but would still be close to the main attractions or conveniently located along the route.

Our itinerary starts in Reykjavík, where we rented a car, and continues north, as we traveled around the island clockwise.

In this article, we're sharing an overview of our tried-and-tested stops with tips on budget-friendly accommodation.

We hope this itinerary helps you plan your own Iceland adventure — and saves you not just time, but money too!


If you're looking for budget accommodation and don't know where to start, this map will definitely help. Just enter a location in Iceland, and it will show you nearby places to stay. You can use the filters to sort options by price. The map compares hotel prices from various platforms like Booking, Vrbo, Trivago, Tripadvisor, Hotels.com, and more. 

Further down in the article, you'll find our recommended stops if you've decided to take on the Ring Road. At each stop, we list suggested accommodations. Most of them are hostels, but many also offer affordable private rooms — which we personally opted for during our trip. 


📍 Reykjavík – The Starting Point of Every Icelandic Adventure

You'll arrive in Iceland at Keflavík International Airport, which is located about 45 minutes from Reykjavík. This is where most people both begin and end their journey around the island.

In Reykjavík, you'll find plenty of car rental options — from major international brands to local companies — so renting a car shouldn't be a problem. And having a car is absolutely essential for any road trip in Iceland.

Budget Accommodation:
Click on the name of the accommodation to book.

  • Hostel Pavi – A budget-friendly hostel offering private rooms with shared bathrooms. It's the cheapest option, and if you ask the staff, you can store your luggage here for free. It's within walking distance of the city center, but keep in mind that it's a multi-story building with no elevator.

  • Hostel B47 – An affordable hostel with private rooms and shared bathrooms, located close to downtown. Luggage storage is available for a fee. It's slightly more expensive, but offers a convenient location for exploring the city.

Don't Miss in Reykjavík:

  • Lenny Bar – A hidden gem in the city center with craft cocktails and a cozy vibe.

  • Blue Lagoon – The famous geothermal spa known for its healing waters and relaxing wellness treatments.

  • Perlan – 360° Observation Deck – A futuristic building featuring a panoramic viewing platform and interactive exhibits about Iceland's natural wonders.

  • Harpa Concert Hall – A modern concert venue with a unique glass façade that reflects the colors of the sky.

  • Hallgrímskirkja – An iconic church inspired by basalt columns, offering a panoramic view of the entire city.

Reykjavík is the perfect place for a short stop before you head out to explore Iceland's natural beauty.


📍Akureyri – The Capital of North Iceland

Our next stop was Akureyri, Iceland's second-largest city, surrounded by mountains and the Eyjafjörður fjord. This cozy city is a great starting point for exploring the northern part of the island.

Budget Accommodation:


  • Hafnarstræti Hostel – Kapsulový hostel, kde síce spíte v spoločnej izbe, ale máte súkromie vo vlastnej kapsule. Najlacnejšia možnosť v Akureyri, s dobrým vetraním a čerstvým vzduchom. Nachádza sa v skvelej lokalite.
  • Hotel Edda Akureyri – Ponúka súkromné izby so zdieľanou kúpeľňou. Je trochu ďalej od centra, no stále v pešej dostupnosti. Na islandské pomery cenovo dostupné ubytovanie.

What to See and Do in Akureyri and the Surroundings:

  • Whale Watching – The north of Iceland offers the best conditions for whale watching, with tours departing directly from Akureyri or the nearby town of Húsavík.
  • Forest Lagoon – A new geothermal spa surrounded by forest, offering hot water with a stunning view of the fjord.
  • Akureyri Botanical Garden – A surprisingly green oasis with over 7,000 plant species, including exotic plants.
  • Hlíðarfjall Ski Resort – The best place for skiing in northern Iceland, ideal for winter sports.
  • Godafoss – One of Iceland's most beautiful waterfalls, known as the "Waterfall of the Gods."
  • Mývatn and Surroundings – A unique area with volcanic craters, geothermal fields, and the Mývatn Lake.

Akureyri is not only a beautiful city with a welcoming atmosphere, but also a great base for exploring the north of Iceland.


📍Eastern Fjords – The Perfect Stop for Relaxation

If you're continuing along the Ring Road, we recommend taking a break in the Eastern Fjords to avoid traveling too many kilometers in a single day. This area offers... 

  • Hafaldan HI Hostel, Old Hospital Building – Accommodation in a former hospital, which now offers both hostel and private rooms. It's located in a beautiful setting, full of history, and creates a unique atmosphere.
  • Vinland Camping Pods – Cozy wooden pods in nature with a kitchen and common area. The bonus is a park with arctic foxes and reindeer, which often come close to the fence. On cooler nights, the pods may be less insulated.
  • Húsey Hostel & Horsefarm – A peaceful farm with stunning views, perfect for hiking and horseback riding. Guests rave about the friendly atmosphere, clean accommodations, and welcoming hosts. You'll also find sheep, dogs, and cats, which add charm to the place.

What to See and Do in the Eastern Fjords:

  • Studlagil Canyon – A canyon with hexagonal basalt columns that create a unique and striking landscape.
  • Egilsstaðir and Surroundings – The largest town in the area, ideal for stocking up on supplies and taking a break.
  • Lake Lagarfljót – A legendary lake where, according to locals, the "Icelandic Loch Ness Monster" resides.
  • Hengifoss – One of Iceland's tallest waterfalls, surrounded by layers of red volcanic ash.
  • Vök Baths – Geothermal baths directly in the lake, where you can soak in hot water with a beautiful view of the surrounding nature.


📍Höfn – The perfect stop on ring road

  • Höfn Inn Guesthouse – The cheapest option in Höfn with a well-equipped kitchen and good cleanliness. The comfort is basic, but it's sufficient for a short stay. They offer private rooms with shared toilets.
  • Höfn Inn Guesthouse – A few euros more expensive but more comfortable, with self-check-in. It offers clean private rooms with private bathrooms, though there are no shared spaces or kitchenette.
  • Höfn Hostel – A modern and highly recommended accommodation with clean rooms and private bathrooms. A well-equipped kitchen is available, offering a high standard overall at an affordable price.

What to See and Do in Höfn :

Höfn is a great place to take a break, especially due to its proximity to the iconic Vestrahorn and Vatnajökull, the largest glacier in Europe. There are plenty of tour agencies around offering snowmobile rides, glacier hikes, and ice climbing. In addition to the stunning nature, Höfn is also famous for its excellent seafood, particularly the renowned lobsters (langoustines). 


📍 Vík – The Last Stop on the Ring Road


Vík is the southernmost town in Iceland and a great place to explore the iconic natural wonders in its surroundings. 

Tips for Budget Accommodation Near Vík:

Although Vík is a must-visit stop, accommodation prices here can be quite high. That's why we recommend staying a bit farther out, where you'll find more affordable options:

  • The Barn – Located 3.4 km from Vík, this accommodation offers both shared and private rooms with private bathrooms. Private rooms are, of course, more expensive, but the accommodation is modern and comfortable. It's situated in a quiet area with beautiful views, creating a pleasant atmosphere.
  • Skogar Hostel – A great location right next to the iconic Skógafoss waterfall. The accommodation is clean, but with basic amenities. It's an ideal choice for those looking for a pleasant and affordable stay near natural wonders.
  • Starlight Camping Pods – Located 10 km from Skógafoss, this accommodation offers cozy camping pods with views of the mountains or garden. There's a shared kitchen, garden, and terrace, perfect for those who enjoy hiking. Parking is free, and the location is ideal for a short stay.
  • Arsalir Guesthouse Vik B&B – The cheapest option in Vík, just a 7-minute walk from the black sand beach. The guesthouse offers rooms with shared bathrooms, but at a great price and an excellent location.

What to See in Vík and the Surroundings:

  • Reynisfjara – The famous black sand beach with hexagonal basalt columns and dramatic Atlantic waves.
  • Dyrhólaey – A rock arch offering stunning views of the coastline and a chance to spot puffins (in season).
  • Skógafoss – One of Iceland's most beautiful waterfalls, often creating a double rainbow.
  • Seljalandsfoss – A waterfall you can walk behind, offering a completely different perspective.
  • Sólheimasandur – The iconic wreck of an American plane, accessible via a hike through the black desert. 

These are suggestions for stops and budget accommodations. If you decide to stop elsewhere, you can still use the map above. We hope this article was helpful and assisted you in finding affordable accommodation.