Where to stay in Reykjavik: the 4 neighborhoods to know in 2026
Geography will not decide much for you here. The Icelandic capital has a population of a hundred and twenty thousand, and you can walk from one end of the centre to the other in under thirty minutes, so no area puts you very far from the Hallgrímskirkja or the waterfront.
What decides is the price. A room in the 101 district runs $170 to $290*, a somewhat out-of-the-way guesthouse goes for $113 to $170*, and a dorm bed costs $46 to $68*. The four areas below range from the most central to the furthest out, leaving you to decide how much that saved walking is actually worth.
To give yourself enough time to visit everything, Reykjavik, the country's capital, makes for an excellent home base.
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At a glance: our picks by traveller type
Pick the profile that suits you to head straight to the recommended neighborhood.
The neighborhood map in Reykjavik
Get your bearings on the neighborhoods and must-see sights before choosing where to drop your bags. Click a name to jump to its description.
District 101, around Laugavegur The centre, between the hill and the pond
for a first trip and for going out at night
This is postcard Reykjavik: corrugated metal houses in bright colours, mural paintings on every gable, and the Hallgrímskirkja towering over everything from its hill. Laugavegur street packs in the bars, restaurants, and wool shops, and it is where the city comes alive at night, late and without pretense. The downside is twofold: prices are the highest in the country, and weekend nights are loud in rooms facing the street.
I loved the street art, the simplicity of the bars, and the sweaters on the trees (yes, really, it was a trend!).
What to see & do in the neighborhood
Where to stay in this neighborhood
Canopy by Hilton Reykjavik City Centre Luxury
A recent hotel a hundred and fifty metres from Laugavegur, featuring the understated Scandinavian design the city does best. You walk out the front door and you are already among the bars.
Hótel Frón Mid-range
Right on Laugavegur, offering rooms and studios equipped with kitchenettes. Cooking half your meals makes a huge dent in the cost of a week in Iceland.
Loft Hostel Budget
Hostel right in the centre, with a rooftop bar that doubles as a meeting point for travellers. The best possible location at a dorm price.
Pros
- The whole centre and the bars on foot
- Tour shuttles pick up right here
Cons
- The steepest prices in the city
- Noisy on Friday and Saturday nights
The Old Harbour and Grandi On the waterfront, to the north-west
for the sea, whale watching, and a slightly quieter centre
A five-minute walk from the centre, the harbour has kept its old hangars and fishing boats, now converted into cafés and museums. This is where whale-watching tours depart, and the adjacent district of Grandi has turned into a hub for studios and ice cream shops. The Harpa concert hall closes off the view on the city side. You get a quiet night's sleep while staying within walking distance of Laugavegur.
Where to stay in this neighborhood
Exeter Hotel Luxury
Right on the harbour in a converted brick building. Clean rooms and a large common area, with the docks and Harpa down the street.
LOCAL 101 Mid-range
Small address between the harbour and the centre, halfway to everything. A solid compromise when you want the quiet of the waterfront without a twenty-minute walk at night.
Butterfly Guesthouse Budget
Simple guesthouse a stone's throw from the docks, complete with a shared kitchen. One of the few reasonably priced options at this distance from the centre.
Pros
- Whale-watching tours leave right from your doorstep
- Quieter than Laugavegur, without being far away
Cons
- Fewer restaurants open late
- The sea wind is noticeable in the winter
Laugardalur To the east, surrounding the thermal valley
for families and the massive geothermal pool
The Laugardalur valley serves as the main park in Reykjavík, featuring the city's largest geothermal pool, a botanical garden, a petting zoo, and the national stadium, all packed into one green space. This area suits families and longer stays best, offering larger hotels and easy parking. Expect a thirty-minute walk into town or a quick bus ride.
Where to stay in this neighborhood
Grand Hotel Reykjavik Luxury
The major east-side hotel built for groups and conferences, featuring a spa and an onsite restaurant. Tour buses make direct pickups here, a major plus in this area.
Hotel Cabin Mid-range
Compact and functional rooms overlooking the bay, located a fifteen-minute bus ride from the centre. One of the most dependable value-for-money options in the city.
Lækur Hostel Budget
Dorms and simple rooms bordering the valley, complete with a shared kitchen. Ideal for multi-night stays without breaking the lodging budget.
Pros
- The geothermal pool and park right down the street
- Rates noticeably lower than in 101
Cons
- A thirty-minute walk into the centre
- Little street life at night
Öskjuhlíð and Perlan To the south, on the wooded hill
for peace, nature in the city, and the prices
The wooded hill of Öskjuhlíð is topped by the Perlan dome and its hot water tanks, offering a panoramic view of the city and the bay. Below, the Nauthólsvík geothermal beach lets you swim in heated water even in winter. It is the greenest and quietest area, but also the one where you rely most on the bus since the centre is about twenty minutes away.
Where to stay in this neighborhood
Berjaya Reykjavík Natura Hotel Mid-range
Large hotel at the foot of the hill, featuring a pool and geothermal spa. A ten-minute walk from the domestic airport where regional flights depart.
IGDLO Guesthouse Mid-range
Quiet guesthouse between the hill and the centre, with a shared kitchen. A solid compromise for anyone wanting greenery without moving too far away.
Bus Hostel Reykjavik Budget
Hostel south of the centre, popular with travellers tackling back-to-back excursions since multiple shuttle buses depart from its doorstep.
Pros
- The hill, the view from Perlan, and the heated beach
- The gentlest rates in the guide
Cons
- The bus becomes necessary to reach the centre
- Nothing to do on-site at night
Our tips for booking the right place
- The Blue Lagoon is not right in town: The geothermal pools sit 50 km outside Reykjavík along the road to Keflavík Airport rather than in a district of the capital. Many visitors stop by upon arrival or right before departure with bags still packed, which makes the most logistical sense. Your choice of area has no bearing on this visit.
- Cooking your own meals changes the weekly budget: Dining out every night hits hard in Iceland. Many spots in our guide feature a kitchenette or shared kitchen, and the supermarkets in the centre are more than enough. Over a one-week stay, this makes the difference between two entirely different hotel price brackets.
- Check where your tour departs from: Golden Circle, South Coast, northern lights: most excursions use shuttles with pickup points scattered across the city. Some pull up right outside major hotels, while others require walking to a designated central bus stop. Check the pickup list before booking your room, especially if you plan to stay in the east or south end.
- Booking far from the centre assuming you can just walk everywhere: Reykjavík is compact, but winter brings biting wind and darkness for most of the day. A pleasant twenty-minute walk in July turns into a slog in January, and the city buses do not run every five minutes.
- Grabbing a room right on Laugavegur for the location without factoring in the noise: the street stays loud late into the weekend, and Icelandic window panes do little to block out the street party. Asking for a courtyard-facing room in the same hotel rarely costs extra.
- Picking a spot near Keflavík Airport to save money: it sits forty-five minutes away from the city proper. People only sleep out there the night before an early morning flight, never as a base for sightseeing.
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