Best Areas and Hotels to Stay in Reykjavik, Iceland

If you are planning a trip to Iceland, choosing where to stay in Reykjavik can shape your whole experience. Reykjavik is a small city, but it has many unique areas, each with its own charm. From the busy city center to quiet residential streets, there is something for every type of traveler. Whether you want luxury hotels in Reykjavik, budget hotels in Reykjavik, or Reykjavik apartment hotels, this guide will help you find the perfect base. Knowing the best area to stay in Reykjavik will save you time and let you enjoy more of the city.

Most visitors spend time in downtown Reykjavik, where attractions, restaurants, and nightlife are easy to reach. The city is walkable, so that you can explore many places on foot. However, Reykjavik also has quiet neighborhoods, family-friendly areas, and scenic coastal locations that are worth considering. Choosing the right hotel or neighborhood will also help if you plan a short stay in Reykjavik or longer trips.

In this guide, we will cover every important area, highlight the top hotels in downtown Reykjavik, and give practical tips about transport, parking, and even spotting the Northern Lights in Reykjavik. You will also find information about hostels in Reykjavik, boutique hotels in Reykjavik, and self-catering apartments in Reykjavik. By the end, you will know exactly where to stay, no matter your budget or travel style.

Reykjavik Neighborhoods Explained for Visitors

Reykjavik has several distinct neighborhoods, each offering a different experience. The city is small, so distances are short, but the vibe changes from area to area. The Reykjavik neighborhoods that most travelers consider are Downtown, Vesturbær, Hlíðar, Laugardalur, and areas near the harbor. Some neighborhoods are perfect for tourists who want to explore on foot. Others are better for families or travelers seeking peace and quiet.

Downtown is the busiest and most central area, but Vesturbær and Hlíðar offer a slower pace. Laugardalur is green and ideal for families, with parks and playgrounds. Staying outside the city is also possible, and it gives better access to the countryside and darker skies for the Northern Lights in Reykjavik. Understanding the neighborhoods will help you pick the perfect location based on your plans and interests.

Downtown (Miðborg) – Stay in the City Center

Downtown Reykjavik is the heart of the city. It is home to many attractions, restaurants, and shops. You can walk to the famous Hallgrimskirkja Church and explore Rainbow Street Reykjavik, which is lined with colorful buildings and cafés. Downtown is perfect if you want to be in the center of the action.

This area also has most of the best hotels in downtown Reykjavik. From luxury stays like The Reykjavik EDITION to mid-range hotels such as Center Hotels Plaza, there is something for every traveler. Dining options are close by, and the nightlife is lively. However, parking in downtown can be tricky, so many visitors prefer public transport or walking.

Vesturbær – Quiet Area Near the Coast

Vesturbær is a quiet residential neighborhood near the coast. It is perfect for travelers who want peace but still want to be near the city center. You can walk along the waterfront and enjoy scenic views of the ocean and mountains. This area is also close to the Old Harbour Reykjavik, where you can book whale watching tours in Reykjavik or visit the FlyOver Iceland attraction.

Accommodations here range from small guesthouses to mid-range hotels. The vibe is relaxed, and local cafés and bakeries give a taste of Icelandic life. You will find fewer tourists here, which makes it a great choice for couples or travelers who prefer quiet streets over busy city life.

Hlíðar – Budget-Friendly and Well Connected

Hlíðar is an ideal choice for budget-conscious travelers. It is well connected to the city by public transport, making it easy to reach Reykjavik city center without spending on taxis. The area has many budget hotels in Reykjavik and guesthouses. Prices are lower than downtown, but the quality is still good.

This neighborhood is perfect if you plan a short stay in Reykjavik and want convenience without high costs. You will still be within reach of attractions like Austurvöllur Square and Lake Tjornin. Hlíðar is also close to restaurants and shops, giving you a practical and comfortable stay without breaking your budget.

Laugardalur – Green Spaces and Family Stays

Laugardalur is famous for its parks, green spaces, and family-friendly attractions. The Reykjavik Zoo and botanical gardens are located here, making it perfect for travelers with children. Laugardalur also has a geothermal pool where families can relax after sightseeing.

Accommodations include Reykjavik apartment hotels and larger rooms that are ideal for families. Parking is easier here than downtown, which is a big advantage if you plan to rent a car in Iceland. The neighborhood is slightly away from the main attractions but still convenient for exploring the city. Families often choose this area because it combines space, greenery, and comfort.

Top Luxury and Boutique Hotels in Reykjavik

Reykjavik offers many luxury hotels and boutique hotels that provide excellent service, stunning views, and unique designs. High-end options include Tower Suites Reykjavik, which offers panoramic city and harbor views, and The Reykjavik EDITION, located near the harbor.

Luxury hotels often include full concierge services, spa facilities, and gourmet restaurants. They are perfect for travelers who want comfort and style. Boutique hotels are smaller but offer a personalized experience and are often located in central areas near Rainbow Street, Reykjavik, and Hallgrimskirkja Church. Nightly rates vary, but the experience justifies the cost for many travelers.

Best Budget Hotels and Hostels

For those looking to save money, budget hotels in Reykjavik and hostels in Reykjavik offer clean and comfortable accommodation without high prices. Popular options include Loft HI Hostel, Hotel Odinsve, and City Center Hotel. These places provide private rooms or dorm-style accommodation depending on your needs.

Many budget hotels are located near central attractions like Austurvöllur Square and Lake Tjörn. This makes it possible to explore the city without spending on taxis. Even on a budget, you can find cozy rooms, friendly service, and access to cafés and restaurants nearby.

Apartment Hotels for Longer Stays

If you plan a longer trip, self-catering apartments in Reykjavik are very convenient. These include the Black Pearl Apartment Hotel, Reykjavik Residence Apartment Hotel, and Room with a View Apartments. Apartments often come with kitchens, washing machines, and multiple bedrooms, perfect for families or groups.

Staying in an apartment allows you to cook meals and save money on dining out. It is ideal for travelers who want more space and flexibility. These apartments are also located in popular areas like Old Harbour Reykjavik, downtown Reykjavik, and near Rainbow Street Reykjavik, giving you access to attractions without compromise.

Staying Outside the City – Is It Worth It?

Staying outside Reykjavik is an option if you want to explore Iceland beyond the city. Nearby towns or countryside hotels are quieter and often cheaper. You can enjoy darker skies for the Northern Lights in Reykjavik and scenic views.

However, staying outside the city usually requires a car rental in Iceland. You need to weigh the cost and convenience against the experience. For those who want to see the city quickly, staying in the city center is better. For travelers seeking a peaceful retreat or aurora views, staying outside can be worth it.

Northern Lights and Where to Base Yourself

Many visitors dream of seeing the Northern Lights in Reykjavik. While the aurora can be visible from the city, light pollution reduces visibility. Coastal areas or locations outside the city offer darker skies and better chances.

Tours are available from the Old Harbour Reykjavik area, but self-guided viewing is also possible. Timing is key: the best months are from September to April. Coastal hotels or quieter neighborhoods give the best balance of convenience and aurora viewing.

Transport, Parking, and Getting Around

Airport transfer Reykjavik from Keflavik Airport is simple with buses, taxis, or private shuttles. Once in the city, walking is easy, especially in a walkable area like downtown. Public buses are reliable and reach most neighborhoods.

Parking in Reykjavik can be limited, so using the Parka app Iceland helps. If you plan to explore Iceland beyond the city, consider a car rental in Iceland, especially in winter when public transport is slower. Knowing transport options saves time and frustration during your stay.

Tips for Booking Accommodation in Reykjavik

Booking early is essential, especially in summer when Reykjavik is busy. Reykjavik hotel prices rise during peak season. Flexible cancellation policies are recommended since the weather can change plans.

Plan your stay according to your itinerary. For a short stay in Reykjavik, staying downtown or near Rainbow Street is ideal. For longer stays, apartments or areas like Laugardalur offer more space and comfort. Always check reviews and compare prices before booking.

Table: Recommended Hotels by Category

Category	Hotel Name	Area	Approx. Price (USD/night)
Luxury	Tower Suites Reykjavik	Downtown	600+
Luxury	The Reykjavik EDITION	Harbor	500+
Boutique	Canopy by Hilton	Rainbow Street	350+
Mid-Range	Center Hotels Plaza	Downtown	200–300
Budget	Loft HI Hostel	Downtown	50–100
Budget	Hotel Odinsve	Rainbow Street	100–150
Apartment	Black Pearl Apartment Hotel	Old Harbour	250–400
Apartment	Reykjavik Residence Apartment	Rainbow Street	200–350

Reykjavik offers something for every traveler. From luxury hotels in Reykjavik to hostels in Reykjavik, and from Reykjavik apartment hotels to quiet residential streets, you can find the perfect place. Choosing the best area to stay in Reykjavik depends on your interests, budget, and trip length. Whether you explore Hallgrimskirkja Church, enjoy whale watching tours in Reykjavik, or relax in Laugardalur parks, Reykjavik is easy to navigate, fun, and full of surprises.

By considering neighborhoods, hotel types, and transport options, your trip to Reykjavik will be smooth and unforgettable. Use this guide to pick your ideal location, book smartly, and enjoy Iceland’s vibrant capital to the fullest.

FAQs

What is the best part of Reykjavik to stay in?
The best area is downtown Reykjavik, close to Hallgrimskirkja Church and main attractions.

Where do most people stay when visiting Iceland?
Most visitors stay in downtown Reykjavik for convenience and easy access to sights.

Is it better to stay in downtown Reykjavik?
Yes, it is central, walkable, and near restaurants, nightlife, and landmarks.

What is the main area of Reykjavik?
The main area is Miðborg (downtown Reykjavik), the city’s hub for culture and shopping.