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22 Best places to stay in Iceland

  • Iceland

Last updated: 19 June, 2023
Expert travel writer: Oliver Berry
  • Hveragerdi, Iceland

  • Official star rating:

Steaming fumaroles, hot springs and a rushing thermal river surround you at Frost and Fire, another impressive luxury hotel that makes an ideal stop as you drive eastwards from Reykjavik on the Ring Road.

It’s located near the village of Hveragerdi, on the banks of the Varma River, and combines stylish rooms with grand views of the Icelandic countryside (the best are the riverside suites, which have small balconies where you can sit and admire the scenery).

Geothermally-heated water is supplied to the hot tubs and the outdoor pool, and also feeds the river – where you can have the bizarre experience of a wild swim in bath-warm water.

Meals are served in the attractive conservatory restaurant, and breakfast even ties in with the geothermal theme: you can boil your own eggs in the naturally hot water, or try traditional hverabraud, hot-spring bread.

Average £240

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2+ bedrooms

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  • Akureyri, Iceland

  • Official star rating:

This city-centre hotel isn’t much to look at – it’s set in a former school – but given the limited options in the ‘capital of northern Iceland’, it’s the best place to stay. The 100 modern Scandinavian rooms are smartly furnished and comfortable..

It’s a ten-minute walk to the centre of Akureyri – not great in the snow – but otherwise it’s ideally positioned for visiting the country’s northern attractions, including Lake Myvatn, Dimmuborgir, Dettifoss and the ski area at Mt Hlidarfjall. The town’s thermal pools are just across the road.

Average £220

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2+ bedrooms

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  • Selfoss, Iceland

  • Official star rating:

Torfhus Retreat

Place to Stay

Torfhus Retreat

The ‘Turf House’ Retreat offers guests the chance to sleep inside a modern version of the grass-roofed houses that were once common across much of Iceland (the turf acted as a form of natural insulation).

Cleverly built from reclaimed timber, volcanic stone and natural materials, the cabins offer understated luxury but also nod to the Icelandic past – you’ll spot old tools, animal skins, vintage sleds, carts and even a sofa made from an old boat as you wander round.

The hotel’s renowned restaurant, in the central ‘meeting house’, serves classy, Neo-Nordic cuisine. There’s also a ‘basalt stone’ hot pool where you can take a soothing dip.

It’s the ultimate luxury cabin experience, and it sits smack bang in the centre of the celebrated ‘Golden Circle’: Geysir is 13km north, Gullfoss 15km northeast, and Thingvellir National Park is 60km west.

Average £900

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2+ bedrooms

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  • Hella, Iceland

  • Official star rating:

Hotel Ranga

Place to Stay

Hotel Ranga

This ranch-style hotel is perfectly located, and your best option, for exploring southwest Iceland.

There are seven bizarre but dazzling suites, taking the world’s continents as their themes and containing items from them all – apart from the Antarctica Suite, which is black and white like a penguin. Weird but wonderful.

There’s also an excellent restaurant in-house, serving locally-sourced food inspired by Nordic cuisine. The menu features plenty of Icelandic specialities, including smoked puffin (which tastes a bit like duck), Icelandic lamb, langoustines and skyr (a type of natural yoghurt) cheesecake. The salmon river provides wonderful fish too.

Located miles from anywhere, it’s a great spot for stargazing. The hotel has set up a special ‘observatory’ with a couple of high powered telescopes, and from September to April, on clear nights, a local astronomer visits to give talks about the stars, explaining the various constellations.

With Iceland being in the Aurora Belt, it’s also one of the best places in the world to see the Northern Lights in all their glory (when they decide to appear – most often between September and April). Stay for at least four nights to give yourself the best chance of seeing them.­ NB The hot tubs are perfectly placed for midnight dips and views of the Northern Lights.

Average £280

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2+ bedrooms

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  • Egilsstaoir, Iceland

  • Official star rating:

Hotel 1001 Nott

Place to Stay

Hotel 1001 Nott

Good hotels are much harder to come by in East Iceland, so this attractive, family-owned hotel is a good find. It’s located near the large glacial Lake Lagarfljot, and makes a convenient base from which to explore the eastern fjords such as Seydisfjordur and Reydarfjordur.

The design is functional: a trio of single-storey boxes containing four rooms each, all attractively decorated with wooden floors, glass doors and little pebbly patio areas where you can sit out and admire the scenery.

There is a decent restaurant and, rather oddly, a cognac lounge. Owners Astvaldur and Kristin are very friendly and full of information on the surrounding area.

Average £190

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2+ bedrooms

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  • Stykkishólmur, Iceland

  • Official star rating:

Hotel Egilsen

Place to Stay

Hotel Egilsen

If it’s a slice of Icelandic heritage you’re after, then this delightful harbourside hotel in Stykkisholmur will be right up your street.

The handsome, timber-clad building dates from 1867, and has been renovated with taste and a discerning eye for vintage design. Retro furniture, old maps, Icelandic books and sheepskin blankets adorn the lounge, and the ten rooms mirror the upcycled, mix-and-match style.

Unlike many Icelandic hotels, which are heavy on style but light on cosiness, the emphasis here is on creating a warm, welcoming space – it feels more like staying with Icelandic friends than the impersonality of a chic hotel.

Average £230

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2+ bedrooms

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  • Reykjavík, Iceland

  • Official star rating:

Hostel Kex

Place to Stay

Hostel Kex

This hostel is located in a refurbished biscuit factory by the sea in central Reykjavik (kex is Icelandic for biscuit).

The chic vintage design moves it a cut above the classic hostel; it’s also got its own library, gym and pizza restaurant, as well as a hair salon in the basement. You can also arrange tours here and hire bikes for exploring the city.

There are four-, six-, ten- and 16-bed dorm rooms available – with shared bathrooms – plus private family rooms and even two hotel-quality, en-suite rooms.

As hostels go, it’s top quality, and great value in an otherwise expensive city.

 

Average £140

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2+ bedrooms

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  • Budir, Iceland

  • Official star rating:

Hotel Budir

Place to Stay

Hotel Budir

This wonderful hotel in the countryside, two hours’ drive from Reykjavik, is the best place to stay for a true Icelandic wilderness experience.

From its rooms, you can look out onto ancient volcanoes, a mystical glacier and a lagoon where seals play; beyond it an empty sandy beach stretches out to the Atlantic, and soft-furred Icelandic horses huddle together in the wind.

The hotel’s country-style decor is idiosyncratic. Parts of the hotel date back to 1948 and the decor is traditional Icelandic. Images of whales, local flora and fauna and ancient legends hang on the walls.

The restaurant is pricey but the locally-inspired cuisine is excellent. There’s also a cosy, characterful bar – perfect for a relaxing drink after a long day of outdoor adventure.

Average £230

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2+ bedrooms

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  • Norourljosavegur, Iceland

  • Official star rating:

If a dip in the fabled Blue Lagoon isn’t enough of a spoil, then for the ultimate indulgence, book a night at this swanky spa hotel, located just a few steps from the lagoon’s western edge. Rooms are beautifully decorated, with expansive glass windows offering views over the Reykjanes lava fields of the lagoon.

There are three upscale restaurants to choose from – the Michelin-rated Moss, Lava or the Spa Restaurant.

Everything here is designed to indulge your every whim, from morning yoga sessions to spa treatments and massages. A section of the lagoon is reserved solely for guests’ use.

Average £1100

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2+ bedrooms

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  • Hofn, Iceland

  • Official star rating:

Milk Factory

Place to Stay

Milk Factory

Iceland is nothing if not eccentric, and this 17-room guesthouse is no exception.

As the name hints, it was once a dairy processing plant, but it’s been renovated into a modern guesthouse. Rooms are very simply furnished – some might say stark – but all are ensuite and offer views over Vantnajokull and the surrounding mountains.

The hotel is situated on the road leading to the southeast harbour town of Hofn, about 2km from the quayside and its excellent seafood restaurants – the best places to taste the town’s legendary langoustines.

Average £150

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2+ bedrooms

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