Where to Stay in Reykjavik: The Best 5 Neighbourhoods

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If you were to ask me what my favourite two countries out of everywhere I’ve travelled are, I would say Iceland and Thailand. Pretty much two polar opposite countries: one is cold and rainy, and the other is tropical; Iceland is fairly cheap to fly to, and Thailand flights are much more expensive; but once you get there, the opposite is true: Thailand is overall a very cheap country whereas the same cannot be said about Iceland. Everything from food to attractions, to tours, and, of course, accommodation in Iceland is very expensive. With that said, you might be wondering where to stay in Reykjavik.

Well, if you are, you’ve come to the right place! As I’ve mentioned, this is one of my favourite countries in the world. I’m probably going to keep visiting it over and over and over again for the rest of my life. So, I definitely have some insights to share about the best places to stay in Reykjavik. Especially since most people who visit Iceland will land in the capital. 

So, without further ado, these are the top places to stay in Reykjavik, to help you make the most of your trip. But trust me, no matter where you stay in this incredible country, I’m sure you’re going to have the time of your life!

Where do most people stay when visiting Iceland?

Most people who visit Iceland will fly into Keflavik Airport. This is located on the west of the island, about a 45-minute drive from Reykjavik. As such, many people who are planning an Iceland itinerary will include at least 1 day in Reykjavik on their itinerary. 

Alternatively, you might want to use Reykjavik as a base and do day trips and tours around the country. Most of the popular locations in Iceland are within about 2-3 hours’ drive of the capital, including the famous Golden Circle and the beautiful south coast. So, including Reyjavik in your stay is pretty logical. 

What are the best places to stay in Reykjavik?

By far the best place to stay in Reykjavik, in my opinion, is Miðborg. Also known as downtown Reykjavik, this area is possibly the most built-up area in the country. It’s also the most cultural. You’ll find some of Iceland’s best museums here and this is also where many tour companies will pick you up if you decide to visit some of Iceland’s most picturesque spots. Plus, and this might surprise you about Iceland, you’ll also find a thriving nightlife scene and a wonderful selection of restaurants from all corners of the world. So, if this is your first time in Reykjavik, I highly recommend you stay in the old town. You won’t be disappointed. 

Where to stay in Reykjavik at a glance

• Miðborg – the best place to stay in Reykjavik for first timers
• Hlíðar – where to stay in Reykjavik on a budget
• Vesturbær – one of the trendiest places to stay in Reykjavik
• Árbær – the most beautiful place to stay in Reykjavik
• Laugardalur – where to stay in Reykjavik with a family

1. Miðborg – the best place to stay in Reykjavik for first timers

Miðborg Reykjavik is the downtown area and city centre of Reykjavik. It is the heart of the city and one of the most vibrant and bustling neighbourhoods in Iceland. The name “Miðborg” translates to “City Center” in Icelandic, which accurately describes its central location and significance.

Here, you’ll find many of the best hotels in Reykjavik. You’ll also find the city’s most popular landmarks including Hallgrímskirkja, the iconic church and one of the most recognisable landmarks in the city, the rainbow street, and many of Reykjavik’s best museums. It’s also a pretty vibrant area, with a lot of fantastic clubs and bars, and an array of boutiques, cafes, and restaurants for you to enjoy.

If you’re wondering where to stay in Reykjavik for a first-time visit, Miðborg is undoubtedly the perfect area as it has a bit of everything. Bustling streets, a mix of contemporary architecture and traditional houses, iconic landmarks, and great cultural sites – plus, many tours will depart from this area of the city. So, it’s the perfect place to stay if you want to use Reykjavik as a base and do day trips to see more of this beautiful country.

Center Hotels Plaza

This was where we stayed during our first time in Iceland and it was perfect. The location was incredibly central – we could walk to pretty much anywhere in the old town. The rooms were also comfortable and modern with wooden flooring, a seating area and comfy beds. The hotel also offers a delicious breakfast and a lounge area with a bar where we sat and had a glass of wine after sightseeing. It was also pretty affordable considering we travelled in December.

Other accommodation options:

• £££ – Hotel Borg – gorgeous hotel with elegant decor, overlooking Austurvollur Square. 
• ££ – Sif Apartments – very modern and elegantly decorated apartments located in the centre of Reykjavik. perfect for a relaxing home-from-home stay.
• £ – Room With a View Hotel – a sophisticated and affordable 4*located in the centre of the city. Rooms are attractively decorated and some have balconies.

2. Hlíðar – where to stay in Reykjavik on a budget

Located close enough to the city centre to have easy access to attractions, but just outside the most expensive price range, Hlíðar is a great option if you’re looking for where to stay in Reykjavik on a budget. Hlíðar is situated immediately east of Miðborg – from certain areas, you will be able to easily walk to the city centre and in other areas, you will have to use public transport. But it’s very well connected, so this won’t take too much time. 

Hlíðar is primarily a residential neighbourhood. As such, it offers a mix of single-family homes and apartment buildings, making it an attractive area for both families and young professionals. You’ll also find plenty of parks and recreational areas nearby and will be able to enjoy vibrant city life while experiencing peace and tranquillity. The Perlan Museum is also located here, which makes for a wonderful day out in itself.

A slight downside is that there aren’t as many bars or restaurants to choose from. But, you can also walk to Miðborg for that and still benefit from the cheaper area!

Eyja Guldsmeden Hotel

Located near Hlemmur Square and within walking distance of Reykjavik’s main shopping street, this hotel is a great option for those looking for a stylish option outside the main city. Featuring 4-poster beds in all rooms and organic toiletries, Eyja Guldsmeden Hotel exudes an aura of luxury and comfort whilst having a fairly reasonable price point. It also has an on-site restaurant serving local cuisine and rooms with ocean or mountain views.

Other accommodation options:

• £££ – Tower Suites Reykjavik – located at the top of a contemporary glass tower, these stylish penthouse suites feature panoramic views of the city.
• ££ – Stay Apartments Einholt – a fantastic option if you’re looking for a self-catering option in Iceland. Stylish and well-equipped apartments with free parking.
• £ – Guesthouse Pavi – a very affordable guesthouse, great for those travelling on a budget. It features simple rooms for up to 4 people and is a 5-minute walk to the centre of town. 

3. Vesturbær – one of the trendiest places to stay

The complete opposite side of Reykjavik to Miðborg, Vesturbær is also known as West Town. As you might have figured, it sits to the west of downtown Rekykavik and is characterised by its captivating blend of history and modernity.

As one of the city’s oldest areas, Vesturbær boasts charming streets lined with traditional Icelandic houses and colourful buildings. The neighbourhood’s proximity to the sea gives it a unique coastal charm, making it one of my favourite spots for leisurely walks and stunning views. 

It’s easy to reach Miðborg via public transport (as it’s about 3km away), and, since you’ll be located near the old harbour, you’ll find plenty of pubs, restaurants, and bars to fill your belly after a day’s exploring. You’ll also find the Whales of Iceland Museum here, one of my favourite museums in the city.

Marina Hotel

I love the way this hotel is decorated. The common areas are stylish with beautiful Scandinavian designs. The rooms are simple, yet cosy, with wooden panelling and balconies overlooking the harbour. It also has curious extra features like chequered bathrooms, quotes hanging on the walls, and a panelled bookshelf. 

Other accommodation options:

• £££ – Black Pearl Apartments – for a little taste of luxury, these apartments are beautifully designed, spacious, and modern, with large beds, and headed floors.
• ££ – Grandi by Center Hotels – with clean, comfortable rooms and a great breakfast, this hotel is another great option for where to stay in Reykjavik.
• £ – Hotel Local 101 – this newly renovated hotel is just a 3-minute walk from the harbour. The rooms are simple and cosy with good views and a great breakfast included.

4. Árbær – the most beautiful place to stay in Reykjavik

Now, if you’re going for a picturesque place to stay in Reykjavik, you can’t go wrong with Árbær. Located in the southeastern part of the city, Árbær is known for its cultural influence and natural beauty. The area boasts a mixture of residential properties and scenic landscapes, creating a rather serene environment away from the hustle and bustle of downtown. 

Of course, the downside to this is that it’s much further away from the city centre. It’s about 5 km from downtown Reykjavik, so you’ll need to use public transport to get there, but this is pretty quick and simple to do.

This part of the city is also home to the Árbæjarsafn open-air museum, which offers visitors a fascinating glimpse into Iceland’s rural heritage and traditional way of life. The museum features beautifully preserved historic buildings and exhibits, providing an exciting glimpse into Iceland’s past life.

Icelandic Apartments

Just a 20-minute drive to the centre of Reykjavik and a 6-minute drive to the beautiful Lake Ellidavatn, these apartments are the best place to stay in Iceland if you want to be near Reykjavik, but also near nature. Each apartment is comfortable and cosy with a plush seating area, an equipped kitchenette, and fantastic views over the water. It’s the perfect place to relax, yet remain close to the Icelandic capital.

Other accommodation options:

• £££ – Hotel Kriunes – overlooking Lake Ellidavatn this 4* hotel offers a peaceful atmosphere, sauna, hot tub, and boat and kayak rentals. The perfect place to unwind.
• ££ – Hotel Island – Comfort – a simple but comfortable 3* hotel with city views, a tour desk, and free parking.
• £ – Hotel Heidmork – this hotel is excellent value, and has a shared lounge area, private parking, and a bar. 

5. Laugardalur – where to stay in Reykjavik with a family

Last but not least, Laugardalur. If you’re wondering where to stay in Iceland with a family, this is probably going to be your best bet. There are TONS of things to do in this area. 

This includes Reykjavik’s largest geothermal swimming pool complex, offering a variety of indoor and outdoor pools, hot tubs, and steam baths for relaxation and recreation.  You’ll also find the beautiful Botanic Garden, Asmundur Sveinsson Sculpture Museum, Húsdýragarðurinn Park & Zoo, and the national stadium, Laugardalsvöllur, where major football matches and concerts take place.

Nonetheless, it’s a surprisingly calm place to stay, and located just north of the city centre, so has easy access to downtown. It’s fairly residential, so nice and laid back, and a great place to have some peace in the evenings.

Hotel Reykjavik Grand

This hotel has a distinctive ‘’grand’ feeling to it. With a comfortable shared area, with high glass ceilings, plush purple seating, and a white brickwork effect on the walls. The rooms are quiet and comfortable with plenty of space and sea, mountain, or city views. The hotel also has plenty of facilities including a fitness centre, and spa offering massages, facials and more. There’s also an on-site restaurant serving delicious Nordic cuisine.

Other accommodation options:

• £££ – R13 – A Townhouse Hotel – a comfortable, stylish hotel with black and gold vibes and a delicious breakfast.
• ££ – ODDSSON Hotel – this modern hotel features cool colours, comfy rooms, and a great breakfast every morning. It’s also within walking distance of Laugardalur Park and has a bus stop across the street for easy connections into the city.
• £ – Hotel Muli – just a 5-minute walk from restaurants and shopping areas in Reykjavik, this hotel offers a simple Scandinavian design.

Where to stay in Reykjavik on a budget?

Hlíðar is one of the best places to stay in Reykjavik if you’re a budget-conscious traveller. This residential neighbourhood offers a mix of affordable guesthouses, hostels, and budget-friendly accommodations, making it ideal for those looking to save on accommodation costs. 

With easy access to public transportation, you can still get to Reykjavik’s top attractions and landmarks. Hlíðar also offers some affordable local cafes and restaurants, giving you the chance to savour Icelandic cuisine without straining your wallet.

Can you see the Northern Lights from Reykjavik?

Technically, the best way to see the Northern Lights in Iceland is to head outside of built-up areas and away from Reykjavik. Nonetheless, on a super-clear day and with a high level of aurora activity, you might be able to see the lights near Reykjavik.

If you want to increase your chances of seeing the Northern Lights while staying in Reykjavik, you’ll want to choose accommodations away from city lights and light pollution. Here are some areas near Reykjavik that provide good opportunities for viewing the Northern Lights:

• Grótta: Located on the westernmost tip of Reykjavik, Grótta is known for its lighthouse and peaceful surroundings. The area offers darker skies, making it an excellent spot for Northern Lights viewing.
• Seltjarnarnes: Just north of Reykjavik, Seltjarnarnes is another suburb with less light pollution, making it a suitable location for witnessing the auroras.
• Þingvellir National Park: While not in Reykjavik itself, Þingvellir National Park is about an hour’s drive from the city and is known for its stunning landscapes and clear skies, which are perfect for observing the Northern Lights.
• Mosfellsbær: This neighbouring town to the northeast of Reykjavik offers a quieter environment and better chances of spotting the auroras on clear nights.

You can also book guided Northern Lights tours from Reykjavik where experts will take you to spots outside the city that have the best chance of spotting the lights. If you’re dead set on seeing the aurora, this might be your best bet!

Also, don’t forget to stay during the winter months (September to April) when the nights are longer and darkness provides a better backdrop for the Northern Lights.

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