Iceland is one of the most beautiful, majestic countries globally. With bright and scenic waterfalls, black sand beaches, otherworldly lava fields, and towering volcanic peaks, it’s no wonder this island is adored by all who visit. I’ve never met anyone who didn’t love the country. However, that beauty comes at a price because Iceland is very expensive. It doesn’t take much to squander your budget here, even if you’re a cautious traveler like me. Luckily, the Land of Ice and Fire has a rough backpacker trail dotted with many Iceland hostels to help you get budget travel trips.

Before we dive in, there are many things to consider while selecting the top one among Iceland hostels. After over a decade of backpacking worldwide, we have learned about things that make a good hostel great.

best iceland hostels
best Iceland hostels

Factors to check before deciding the best among Iceland hostels:

The top four factors are:

1. Spot:

Iceland is spread out, and it can take some time to get around. Choose a spot near the sites you want to visit and where you want to experience the nightlife. The hostels mentioned here are centrally located.

2. Cost:

It is a well-known fact that you get what you pay for, so if you go with an economical hostel, you’re probably going to get one that is uncomfortable and doesn’t offer excellent services.

3. Facilities:

Most hostels offer free Wi-Fi, and some include complimentary breakfast, but to get more than that, you must do your research to find the one that meets your needs!

top iceland hostels 1
top Iceland hostels

4. Workforce:

All the hostels mentioned here have a fantastic workforce. They are knowledgeable and super friendly. Even if you don’t like to stay at any of the places mentioned below, always search reviews online to ensure that the staff is friendly and helpful wherever you are visiting. Staff can make or break a hostel!

Below is the list of the best hostels in Iceland, in my view. They all offer a welcome pause and a friendly and cozy place to lay your tired head and hang out with fellow travelers afterward — all while keeping your budget flawless.

11 Hostels in Iceland City

If you are not interested in reading the whole list, the following are the best Iceland hostels in each category:

Cost per night:

$ = Under 5,000 ISK

$$ = 5,000-7,000 ISK

$$$ = Over 7,000 ISK

11 Hostels

1. KEX Hostel (Reykjavik)

This small 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 various rooms: mixed dorms, female-only dorms, private double rooms, and rooms that make room for families. The dorms in the hostel have lockers, but you’ll need to bring your lock.

kex hostel iceland
kex hostel Iceland

It’s a very social hostel, and the narrow area makes it so easy to meet people. The multiplex is also the long-term home of designers, artists, adding a hip and creative element. There’s a warm outdoor terrace, as well as kitchen amenities. It’s also located at the city’s center, 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 3,300 ISK.
  • Private rooms from 10,200 ISK.

–> Book your stay at KEX! 

2. The Freezer (Snæfellsbær)

The Freezer is located in Snæfellsbær in western Iceland. It isn’t big: it has only four rooms and can accommodate 22 persons. But even being smaller in size, it offers a lot of fun. This is a craftsy, laid-back backpacker hostel where it’s easy to socialize and meet new people. The free-of-charge tiki bar is lively, particularly during the 6–8 pm happy hour. Common areas have great board games, and they have a busy schedule of events like film screenings, pub quizzes, and live music regularly.

the freezer hostel iceland
the freezer hostel Iceland

The beds are unimpressive, but the rooms are colorful, and there is a kitchen if you want to cook. Linen is also included in the total cost.

The Freezer at a look:

  • $
  • Excellent on-site tiki bar with a great happy hour
  • Friendly vibe
  • Nightly scheduled events
  • Beds from 4,000 ISK.
  • Private rooms from 22,000 ISK.

–> Book your stay at The Freezer! 

3. Akureyri Backpackers (Akureyri)

Located in the town center near bars, restaurants, and coffee spots, this is also one of the top Iceland hostels, which are as lively as a place you’ll find in the northern city of Akureyri. The free-of-charge bar serves up a few different local brews on tap and a menu of non-Icelandic comfort tummy fillers like nachos and burgers.

Akureyri Backpackers hostel iceland
Akureyri Backpackers hostel Iceland

There are 103 beds in total on its three floors. The rooms consist of single-gender dorms, mixed dorms, and private rooms. The dorm beds are not super comfy, but the rooms and lockers are comparatively spacious. Also, 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 4,600 ISK. Private rooms from 15,000 ISK.

–> Book your stay at Akureyri Backpackers! 

4. Bus Hostel (Reykjavik)

Situated in a calm residential neighborhood about a 15 to 20-minute walk from central Reykjavik, the modern hostel is neither housed in a bus nor has a bus theme, despite its name. However, it is very close to the central bus station, making it favorable to the airport.

bus hostel iceland
Bus Hostel Iceland

The rooms consist of private rooms, female-only dorms, and mixed dorms. Linens are also included, which is a not-so-typical perk for Icelandic hostels. The bathrooms are clean and modern with excellent shower pressure. Buzz’s on-site bar is fun to sample one or all four beers on tap. The kitchen is decent enough, though it can get busy sometimes, so make sure you get in there early if you want to cook.

Bus Hostel at a glance:

  • $
  • Convenient location near the central bus station for easy airport transfer
  • Laid-back vibe
  • Great in-house bar
  • Beds from 4,000 ISK. Private rooms from 16,100 ISK.

–> Book your stay at Bus Hostel! 

5. Hafnarstræti Hostel (Akureyri)

The modern hostel is made up of capsule rooms if you want a sci-fic experience during your stay in Iceland. Here, you’ll get a pod that seals shut instead of a regular bunk bed, allowing you to get a peaceful sleep without the common dorm-room distractions. The pods are pretty spacious and have plugs, a video screen, and a storage space. The bathrooms are also super clean, and the beds are comfortable.

Hafnarstræti Hostel in iceland
Hafnarstræti Hostel in Iceland

You can hang out in the spacious standard room and play billiards and other board games with your fellow travelers.

Hafnarstræti Hostel:

  • $$$
  • Tasty breakfast is included
  • Captivating common area
  • Comfy and cozy pod rooms
  • Sleeping beds from 9,400 ISK.

–> Book Hafnarstræti Hostel for your stay! 

6. Loft HI Hostel (Reykjavik)

Once voted the best hostel globally, this Reykjavik spot has a lot to live up to. And it never disappoints. Private rooms and dorms are nice enough that you will love chilling out in the room for a while. The dorm bunks, while essential, are comfy, and the mattresses are thick.

Loft HI Hostel in iceland
Loft HI Hostel in Iceland

Some rooms have excellent city views. However, you can also head up to the rooftop deck to have a beer sip from 4 pm to 8 pm (the daily happy hour); it is a lively social place to meet other travelers. The hostel often puts on evening events, such as live music and stand-up comedy, and the staff is always around if you have queries or need assistance planning your trip.

Brief about Loft HI Hostel Name:

  • $$
  • Great views of the Roof deck
  • Fun and happy hour
  • Luxury rooms
  • Beds from 6,750 ISK.
  • Also, Private rooms from 26,000 ISK.

–> Book Loft HI Hostel for your stay!

7. Lækur Hostel (Reykjavik)

This hostel is named for the thermal springs that stream beside it. There are plenty of rooms, including single, double, and triple private rooms and eight-bed dorms. The beds are comfy, though the bunks don’t have curtains (they have their plug and lights, though). The chic bathrooms are spotless. The large shared kitchen is equipped enough that you may be tempted to cook your food every night; however, you can try the Nordic-themed café because of its good offerings.

Lækur Hostel in iceland
Lækur Hostel in Iceland

Brief about Lækur Hostel:

  • $$
  • Nordic-themed café
  • Tasty breakfast
  • Chic and clean design
  • Beds from 5,850 ISK.

–> Book Lækur Hostel for your stay! 

8. Galaxy Pod Hostel (Reykjavik)

As the name suggests, beds here are in futuristic pods. The small sleeper containers are surprisingly clean and comfortable, with lights and gadgets that almost make you feel like you’re in your little spaceship floating around the universe somewhere. They also have AC, TVs, and outlets.

Galaxy Pod Hostel in iceland
Galaxy Pod Hostel in Iceland

The hostel also has a lounge with fantastic mountain scenes from the windows. The big shared kitchen is fully stocked, and there’s a grocery store right across the street if you plan on cooking. The staff is good to help you plan budget travel trips in Iceland city.

Brief about Galaxy Pod Hostel:

  • $$
  • Comfortable and futuristic sleeping arrangements
  • Attractive lounge
  • Good location
  • Beds from 5,500 ISK.

–> Book Galaxy Pod Hostel for your stay! 

9. Laugarvatn Hostel (Laugarvatn)

It is located along a geothermal lake of the same name in southwestern Iceland. The unique thing is its fun bar with a piano, basic but clean rooms, and a kitchen with almost everything you need. Moreover, the shower pressure is excellent too. The hostel is situated near Thingvellir National Park, and the hostel staff can often arrange various outings, such as hiking and fishing.

Laugarvatn Hostel in iceland
Laugarvatn Hostel in Iceland

Laugarvatn Hostel at a glance:

  • $$
  • Fun outdoor excursions
  • Lively bar
  • Comfy beds
  • Beds from 6,000 ISK. Private rooms from 14,000 ISK.

–> Book your stay at Laugarvatn Hostel! 

10. Grundarfjördur Hostel (Grundarfjördur)

Grundarfjördur Hostel is an excellent base for exploring Snæfellsnes Glacier National Park, with supposedly magical features. The hostel is a two-story red building, including the reception desk and lobby. But also, it has sleeping quarters all around the small village.

Grundarfjördur Hostel in iceland
Grundarfjördur Hostel in Iceland

The dorm bunks are basic but comfortable, the rooms are neat and clean, and there’s a kitchen too if you need to cook. The design and paintings are a bit dated, but the hostel is comfortable, cozy, and in a great location. The views here are excellent (you can see the famous Kirkjufell, or Church Mountain, from some rooms).

Grundarfjördur Hostel at a glance:

  • $$$
  • Suitable for families and also couples
  • Captivating location
  • Good common room
  • Beds from 8,300 ISK.
  • Private rooms from 10,500 ISK.

–> Book Grundarfjördur Hostel for your stay! 

11. Hafaldan HI Hostel – Old Hospital

As the name implies, this beautiful hostel is an erstwhile medical facility. There’s a bath with a sauna, and they have extra comfy rooms.

Hafaldan HI Hostel in iceland
Hafaldan HI Hostel in Iceland

They have dorms and two-person rooms, four-bed private rooms with shared bathrooms, private bathrooms, and even a private apartment. While the beds in the intimate space are decent enough, the dorm beds are pretty basic and not so comfy. Moreover, the rooms are clean, and the showers are under tremendous pressure; even the bathrooms are spotless.

Brief about Hafaldan HI Hostel – Old Hospital:

  • $$
  • Offer spa with sauna
  • Amazing location
  • Friendly and supportive staff
  • Beds from 5,000.
  • Private rooms from 14,000 ISK.

–> Book Hafaldan HI Hostel – Old Hospital for your stay!

There are a ton of hostels in Iceland. I was always amazed at how incredible they were. Sometimes, you could find a modern, clean, comfy hostel, even in tiny little towns. And, given the country’s popularity, they are always full of other travelers, so you get a chance to meet new travelers.

Iceland may be costly, but the hostels here offer you one of the best ways to get the best Iceland hostels while meeting other travelers. Never avoid them when you visit, even if you are over dorms and want your room.

Get the Comprehensive Budget Travel Guide to Iceland City!

Do you want to plan a perfect trip to Iceland? Check out my in-depth guide to Iceland written for budget travelers like you! It cuts out the dustballs found in other directions and gets straight to the information you need. You will discover suggested routes, tips, budgets, and different ways to have budget travel trips. Also, you will find the beaten path activities and scenes, and non-touristy restaurants, bars, transportation tips, markets, and more.

Budget Travel Trips to Iceland: Logistical Tips and Tricks

Book Your Flight Now

Use Skyscanner or Momondo to find an economical flight. Both are two excellent search engines for looking up websites and airlines globally so that you will save time and energy. Take a start from Skyscanner first, though, because of its extensive reach!

Plan Your Accommodation

You can book your stay at a hostel with Hostelworld as they have fantastic deals and an enormous inventory. But don’t worry if you don’t want to stay at a hostel, use as they consistently strive to offer you the lowest rates for economical hotels and guesthouses.

Hostels in iceland
Hostels in Iceland

Get yourself Travel Insurance

Travel insurance can help you protect against theft, injury, illness, and cancellations. It’s full-fledged protection in case anything goes wrong. Don’t go on a trip without travel insurance. The best companies that offer the best service and value are:

Insure My Trip (for those over 70)

World Nomads (for everyone below 70)

Medjet (for repatriation coverage)

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