Iceland is a place that feels out of this world – it’s unique landscapes and geography can be experienced nowhere else on this planet. It’s fitting that there are tons of cool places to stay in Iceland.
While it’s not a large country in size, the unique lodging options are endless – bubble hotels, luxury cabins, authentic guesthouses and fascinating hotels.
There are 7 main areas & regions in Iceland: Westfjords, North Iceland, East Iceland, West Iceland, Reykjanes, South Iceland and Reykjavik (capital city).
While this seems like a lot, within a 300 kilometre loop you can cover almost all of the country’s top attractions!
And if you take your time, Iceland is the perfect slow travel destination.
As far as the best area to stay in Iceland, I recommend 2-3 nights in (or close to) Reykjavik and then one or two more places along the Golden Circle.
This will give you the most convenient access to the tops highlights and attractions.
This list of affordable unique places to stay in Iceland has choices for each!
There’s no better way to soak up the enchanting views and breathtaking vistas than to stay somewhere epic.
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Cool Places to Stay in Iceland
1. Arnarstapi Cottages
Perfect for a secluded adventure near hiking and dramatic cliff views
Individual modern cottages to enjoy the surrounding sweeping views.
Close to nearby attractions like the Stone Bridge (where Puffins like to hang out), hiking trails near Hellnar and lava fields and volcanic cliffs.
Check prices & availability on Booking.com
2. Northern Lights Geo Dome
Perfect for Northern Lights views on a budget
Stay in a geodesic dome in Iceland that’s actually affordable!
This bubble house is a hard top (not canvas) and has several skylights in the roof so that you can lay in bed and watch the northern lights dance across the sky.
Anyone who visits Iceland needs to experience at least one night in a geo-dome.
Plus, the location of this dome is only 3kms away from the Black Beach hot tubs, the Beer Spa and whale watching.
Added bonus – you will love the scenic drive up to northern Iceland through the countryside and charming rural villages.
Inside Tip: September through March is the best time to see the Northern Lights in Iceland.
It’s located on the edge of Reykjavik, so you don’t have to travel far to experience the dome life!
P.S. – read my 12 tips for finding the perfect vacation rental every time.
3. Hotel Viking
Perfect for your first one or two nights in Iceland
I mean, if you’re traveling to Iceland, who wouldn’t want to be a viking?!
The traditional viking decor is abundant inside and out, and a stay here includes an Icelandic breakfast spread.
But you should definitely try to plan at least one dinner at the hotel restaurant where you get to experience a true viking feast.
The rooms are on the smaller side, but it’s a great place to stay for one or two nights on your arrival or departure from Reykjavik as it’s close to the airport.
4. Hlid Fisherman’s Village
Perfect for quiet countryside lodging just outside of the city
Those seeking an authentic experience should stay in these Stylish Icelandic Houses in a traditional fishing village.
Perfectly situated just outside of the city of Reykjavik for peace & quiet and far enough away from the bright city glow to see the northern lights.
Most rooms have views of the ocean and the peaceful sound of the water in the peninsula.
5. Penthouse Suite in Downtown Reykjavik
This downtown Reykjavik this top floor apartment has 2 bedrooms and enough room to sleep 6 adults, making it a perfect option for a group or family trip.
You will have views of the famous Hallgrímskirkja church of Iceland, and guests have even reported catching the aurora borealis from here as well!
P.S. – While you’re staying in the city, I recommend taking a local food tour! Iceland has some pretty unique dishes that you don’t want to miss out on.
This tour not only takes you to a hidden traditional restaurant (among others), you also get an in depth tour of the city, the country’s history and local landmarks.
6. Puffin Nest Capsule Hostel
Perfect for budget travelers staying in Vestmannaeyjar
At under 40 dollars a night, this capsule hostel is where you can stay in Iceland for cheap!
These ultra modern space-like capsules can sleep one person and each have their own TVs and free WiFi.
The hotel is also conveniently located steps away from the Ferry terminal, which you will have to take to get to this island.
The Westman Islands (also known as Vestmannaeyjar) is home to the largest population of nesting puffins in the world, who lay 10 million nests here between May and September each year.
Check prices and availability on Booking.com
7. Unique Tiny Home Close to the Golden Circle
Perfect for a great home base to explore the south of Iceland
These modern little cottages are in a rural setting where Icelandic horses roam around the adjacent farm property.
If you’re renting a car and want to see the sights off the golden circle, this is an excellent budget option as you can also cook your own meals in your kitchenette.
And you’re only 10 minutes away from the Hrunalaug hot spring and the village of Flúðir, home to the Secret Lagoon Hot Spring (Gamla Laugin) – the oldest natural geothermal pool in the country.
>> You Might Like: 3 Natural Hot Springs to Visit on Road Trip in British Columbia
8. A Lava Field Cabin
Perfect for hot springs, volcano and Game of Thrones lovers
Finally, if you can splurge a little more to stay somewhere ultra cool, this cabin overlooks a lava field and the volcano crater, Hverfjall.
The nearby milky turquoise waters of the Mývatn Nature Baths are another great alternative to the Blue Lagoon.
You’re also minutes away from the Grjótagjá cave which holds a hot spring inside and was the set for a steamy Game of Thrones scene.
And in one hour, you can reach the Goðafoss Waterfall, one of the most majestic in north Iceland.
Related Reading: 11 Natural Mud Baths Around the World That Will Heal Your Soul
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