5 Best Budget Hostels in Iceland
Iceland is famously expensive — from dining to activities, prices can be jaw-dropping. To travel smart without overspending, saving on accommodation is key. Thankfully, Iceland has many hostels and shared lodgings that are clean, stylish, and comfortable. Here are five highly rated hostels that deliver excellent value — so you can stretch your budget without sacrificing comfort.
KEF Hostel
Ranked among the top three hostels in Reykjavik, KEF Hostel stands out for its unbeatable location. It’s right in the city center, within walking distance of most major attractions. A Bonus supermarket is just five minutes away, making grocery runs easy. Many local tour operators also recognize this hostel — meaning pick-ups and drop-offs for excursions can be arranged right at the door.
Once a biscuit factory, the building retains a vintage industrial aesthetic. Dorms are available in 4-, 8-, 16-, and 42-bed configurations, with a women-only option as well. Each dorm comes with lockers and lower bunks equipped with curtains for privacy. Double and family rooms are also available, some with private bathrooms. Prices start around HK$200+ per bed, while a six-person room costs about HK$3,700 — a great deal for a central location.
Facilities include a daily buffet breakfast and a shared kitchen for guest use, plus a cozy lounge and heated outdoor terrace. There’s free luggage storage, and the in-house bar hosts live music from Thursday to Saturday — a must for music lovers.
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Nordic Hostel
Nordic Hostel is a traveler favorite with high ratings across booking platforms. Located right in downtown Reykjavik near the Sundhöllin public swimming pool, it’s within easy walking distance of key sights. The nearest bus stop is just two minutes away, making it a breeze to join tours or airport transfers.
The design is modern with a natural, wood-toned “forest” vibe. Dorms come in 4-, 14-, and 26-bed setups, all featuring desks, lockers, and privacy curtains. The beds are noticeably spacious and clean, offering more comfort than typical hostels. Prices start from around HK$600 per bed and rarely exceed HK$800 — great value for the location.
Facilities include a lounge and bar, a shared kitchen for guests, and free luggage storage.
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CityHub Reykjavik
CityHub Reykjavik brings a futuristic twist to the hostel experience. Located in the city center, it’s just five minutes’ walk from Rainbow Street and Bonus supermarket, with a bus stop next door for easy connections to tours and transfers. The self check-in system means you can arrive anytime — a huge convenience for late-night travelers.
Instead of traditional dorms, each sleeping space is a private pod-style room for two guests — spacious enough for luggage and fitted with wardrobes for privacy. Larger lockers handle big bags securely. Rooms start around HK$870 per night, making this a stylish and practical choice.
Guests enjoy a daily buffet breakfast, a shared lounge and bar, and access to a free outdoor hot tub — a relaxing Icelandic touch.
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The Barn
Located near the small town of Vik, The Barn is a favorite stop for travelers driving Iceland’s Ring Road. It’s just a six-minute drive from the Black Sand Beach and eight minutes from downtown Vik — perfect as a mid-route stop or base for exploring the south coast.
The design is strikingly monochrome and industrial-chic. Mixed dorms are available with 4 or 6 beds, with a choice of double or single bunks. Each bunk has blackout curtains and storage lockers. Private double rooms are also offered. Prices start around HK$500 per night, ideal for budget travelers. Facilities include a spacious common area, bar, and a fully equipped kitchen large enough for multiple guests to cook at once. There’s also free parking and luggage storage.
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Höfn Hostel
Located right in the center of Höfn, this hostel is close to tour offices — ideal for guests planning glacier hikes or exploring Iceland’s east. Höfn Hostel offers a wide range of rooms: 10-bed dorms, singles, doubles, quadruples, and family rooms for up to six guests. Prices start around HK$400 per night, making it one of the best-value stays in town.
The design is simple and Scandi-modern, with a spacious garden featuring a free-to-use BBQ grill. The large shared kitchen is well equipped for group cooking, and there are paid laundry and drying machines — convenient for long-term travelers. The hostel can also assist with booking activities like glacier walks or snowmobile tours, offering great local service.
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