How to Travel Iceland on a Budget
Europe Travel,  Iceland,  Travel tips

How to Travel Iceland on a Budget

Before I begin with money saving tips for travel in iceland based in Reykjavik, it needs to be said that Iceland is not a budget travel destination. It is notoriously one of the most expensive countries in the world. HOWEVER, there are still plenty of ways to save whilst you’re out there and cut down on flights, accommodation costs and even extra phone costs, like getting a travel SIM card. I found food to be my biggest cost after the multi-day tours, but I do believe that it was worth every penny to visit a place I’ve been dreaming about for years. In this post I will share some of my insider money saving tips and help you to travel Iceland on a budget.

Icelandic Currency

A hand holding Icelandic krona. Read on for ways to travel iceland on a budget.
Sadly not as much money as it looks

Icelandic National currency is Icelandic Króna aka ISK. £1 is equal to approximately ISK 163. Similarly, $1: ISK 126, €1 : ISK 137. My favourite app for converting prices to your native currency on the go is XE Currency. It’s pretty easy to spend more than you normally would on holiday so I find this very useful.

Finding Cheap Flights

A plane at Keflavik airport at sunrise. Finding cheap flights is important when travelling in Iceland on a budget.
What a lovely welcome to Iceland; during winter the sun rises at 10:30

I may have gotten somewhat lucky with my last minute (week before) flights, but I recommend using Skyscanner. You can track flights from your chosen airport, so that you get notifications when the price goes up or down. I checked the price from a few UK airports, as my local one, Birmingham is often not the cheapest airport to fly out of. I also cross referenced the prices with Google Flights to check I wasn’t missing anything.

I managed to get flights from Gatwick to Keflavik with TUI for £69 return. This is pretty decent given the location, time of year and last minute booking. I was even more pleasantly surprised to be flown to Keflavik airport (a grand total of 2 1/2 hours) on a Dreamliner. There must have been a large volume of people flying from london to Reykjavik for the pre-Christmas season, as we got a huge, luxurious plane with free movies that I’d expect for a long haul flight.

Everyone I met on my first tour had flown in with Icelandair and was surprised at how cheap I managed to get my flights. My main advice is being flexible with your dates and checking comparison sites. If you are willing to fly out a day or two earlier or later, you could save a lot of money.

Getting to Reykjavik From the Airport

A girl sitting on a pink suitcase at an airport. Read for the best airport transfers in Iceland on a budget.

Flybus Transfer

Keflavik airport is the primary airport for international travel to Iceland. To get from Keflavik to Reykjavik you will need to arrange some kind of transfer. Taxis will be expensive so I recommend getting the Flybus transfer (arranged by Reykjavik Excursions). The journey takes around 45 minutes but i would leave at least an hour when planning your route there and back, as it can go over. It’s a comfortable coach journey, a good opportunity to take a pre/post flight nap, or just enjoy the scenery, and is a good budget option.

As you exit the airport you will see signs for coach pick-ups and there is a booking desk for flybus if you decide to leave it until iarrival to buy.The transfer costs upwards of £18 each way. I paid ££36.92 for both ways, which i bought separately on get your guide. If you’re on a tight budget you can choose the BSI (rejkjavik’s main bus station) drop off and make your own way to your hostel or hotel.

You can pay more for a hotel drop off if getting to/from the airport in one leg puts your mind at ease, or if your hotel is not very central. It is however possible to walk into the city from the BSI terminal or take a bus. Skip to the Getting Around section for more information on bus travel in Reykjavik. The bus numbers you can get from BSI to Reykjavik are 1, 15 or 5. I took the bus on the way back as it was still dark and it took me a while to walk to my hostel on the first day lugging my (inevitably over packed) carryon.

It is possible to get to Reykjavik from Keflavik airport via public bus number 55, but its not the must reliable option and service times differ. If you want a detailed comparison of the different options, I recommend this guide by Full Suitcase.

Budget Accommodation

A wooden bed with white sheets in a hotel room or guest house. Disover the best accommodation options for travel in Iceland on a budget.

For the 3 nights I spent in Reykjavik not on a tour, I stayed in some reasonably priced hostels in the city centre. Staying in a hostel, budget hotel or guest house are great options for travel in Iceland on a budget. It’s an added plus if there are facilities to make your own food and/or breakfast included.

Galaxy Pod Hostel

A blue-lit capsule room in Galaxy Pod hostel in Reykjavik. This is a great option for travel on a budget in Iceland.

I spent the first night in Galaxy Pod Hostel. Compared to other hostels in the city, it’s on the more expensive side, but still a budget option, starting from around £37 per night. In comparison to the £110 some of my tour mates spent on a hotel, I think I did pretty well there.

The outside view of the pod dorms in the Galaxy Pod hostel. Hostels are a great way to travel Iceland on a budget.
The pods from the outside

I found this hostel on Hostelworld quite a while ago whilst I was still working. I was fantasising about going to Iceland solo but not feeling brave enough (oh how times have changed)! I knew that I’d have to stay there at least one night because of the novelty of the space-themed blue lit pods. I felt I owed it to my former travel curious self to live it out how I’d imagined.

Each pod has it’s own TV, sockets, mirrors, safes, air conditioning and charging station. They are quite spacious and have enough room to change clothes, do your makeup in (if you want to risk it in the blue light) etc. You could even pack in there.

I can appreciate that hostels, and maybe novelty hostels in particular are not to everyone’s tastes, but I really liked it there. It was great for my first night when I was tired as anything and didn’t fancy being too sociable. I wanted my space and time to relax. The breakfast was in the region of ISK 1000 (around £6). It was pleasantly surprising and included freshly made waffles and Skyr (Icelandic yoghurt).

A blue lit space pod in galaxy pod hostel in Reykjavik, a great accommodation option for travel in Iceland on a budget.
Interested to see if anyone can tell what I was watching ? Yes I love cartoons

The hostel also has a free virtual reality room, cool chalk messages from the guests all over the walls and is only a 10 minute walk from downtown Reykjavik. It is situated on Lauveger, a very long, shopping street and is right across the road from Kronan, a 24 hour grocery store.

To save even more money, I recommend going for the 24 bed mixed dorm. As a solo female traveller, I often go for an all female dorm for the comfort and peace of mind. However, given that you are in lockable pods, this place is an exception. On top of that, it was super quiet for a 24 bed dorm, and I hardly saw anyone in there in 24 hours. Given what it is, budget accommodation, I found it to be quite a relaxing, luxurious experience.

Helmmur Square Hostel

The lobby area of Hlemmur Square Hostel in Reykjavik, a good hostel for travelling Iceland on a budget.

The next hostel I stayed in was Hlemmur Square, which is very conveniently located right by a food hall on the main shopping street, a short walk from the harbour and the bars in downtown Reykjavik. This was very decently priced, considering this is Iceland we’re talking about, starting from around £15 per night. This is a great option for travel in Iceland on a budget.

I stayed for 2 nights, one either side of my second tour. I slept pretty well considering I chose a 12 bed female dorm and am a light sleeper. The dorms were very spacious and had their own chill out area and sink inside. You wouldn’t guess that you’re sharing with 11 other people. Sure, it’s not the height of luxury, but it gets the job done if you’re looking for a cheap bed for a night or two.

They have a nice bar and sleek lobby area as well as self catering kitchens and common rooms on the various floors. They also offer an Express breakfast for people (like me) on the go. You can take with you on your tour bus, which will often pick you up right outside of the front doors.

Dormitory bunk beds at Hlemmur Square Hostel. Hostels are a great way to save money when travelling in Iceland on a budget.
My bed on the top left

Bus Hostel

The Bus Hostel is another option and comes well rated on hostel world. It is very conveniently located right by Reykjavik bus terminal. The airport direct shuttle will take you straight there with no extra hotel drop off fees. It is a bit of a walk into central Reykjavik, but you can take the bus.

Hotel Cabin

I spent 3 nights at Hotel Cabin, which was the included accommodation on my Contiki tour (check out my last post for a review). Breakfast is included and prices start from around £54 for a twin room. The rooms are fairly small but are en-suite and comfortable. The location is near a few convenience stores and is about a 20 minute walk into the city centre. Dorm beds are available starting from £11 per night.

Bring Your Own Water Bottle

A purple metal water bottle sitting on a bed of rocks. Carrying a refillable water bottle is one way to save money and travel on a budget in Iceland.

Save yourself a lot of money by bringing a reusable water bottle. The water in Iceland is some of the purest in the world and is drinkable everywhere. You can fill your bottle up at your accommodation, at coffee places or at public water fountains. One of the first things you’ll probably see at the airport is a water fountain with a poster telling you how fresh the water is. Iceland try to do their bit for the environment by making water readily available so that you don’t have to buy it.

Places to Eat

Eating out is very expensive in Iceland. I managed to spend £30 in a downtown bar on a beer and one starter (yes, a STARTER). Needless to say, on so little food, I got a little drunk that night. At around £7 a pint, the beer is not cheap, but it’s renowned for its quality due to the glacial water used. And…it’s cheaper than food. Fun fact: Beer was prohibited in Iceland until 1989!

I recommend staying in accommodation with cooking facilities so you don’t have to eat out for every meal. Balance is key, so definitely make an allowance for a couple of meals out.

That said, here are a few affordable spots to eat at in Reykjavik whilst you travel Iceland on a budget:

Svarta Kaffid

Soup in a bread bowl at Svarta Kaffid in Reykjavik, a good place to eat when travelling Iceland on a budget.
Great idea for an afternoon pick me up

This charming café is hidden on Laugavegur and sells hot soup served in a crusty bread bowl. There are two options: a vegetarian soup and a meat one. The veggie soup was tomato based and creamy. They also have a bar and serve hot drinks. It’s a really cosy place to escape the cold.

And the best part about it? Unlimited refills for free! I took advantage and had at least two bowls of the good stuff, but as expected the bowl starts to lose it’s composure after the first refill. You can use the top of the bread bowl to dip in the soup with some butter. The bread soup costs 1,550 ISK, which is around £9.50. This was the cheapest sit in meal I had in Iceland. Also…did I say free refills?!

Reykjavik Chips

Another budget option is Reykjavik Chips. They’re highly recommended as the best chips in town and are pretty reasonable at the equivalent of £5-8. I heard from people in my hostel that the chips are really delicious and come with different sauce options. I did skip this one because despite the friendly prices (and who doesn’t love chips) I needed some proper food with at least the illusion of some nutrition after the long, cold days.

Hlemmur Matholl

Hlemmur Matholl is a food hall on Laugavegur. It is next to Hlemmur Square Hostel and across the street from the Phalological Museum (yes there really is a penis museum). Average spend there is between £10 and £20, depending on what you order. There have all sorts of cuisine from Italian to Icelandic.


I know, I know! Granted, it’s kind of bizarre to suggest such a massive worldwide chain as a place to eat at in Iceland. However, they are absolutely everywhere in Reykjavik and in reality, as a budget traveller it will probably come in handy as a quick, cheap, convenient (and familiar) option at some point during your stay. When you get back from a 10 hour tour and all you want to do is eat and go to sleep and there’s a subway right opposite your hostel- it’s just got to be done!

Buying Food

A stock photo of bananas in a supermarket. Buying and cooking your own food is essential to travel Iceland on a budget.

I have mentioned the Kronan store opposite the Galaxy Pod Hostel, just off Laugavegur that is open 24/7. This, along with the Bonus shops, are good places to shop in Iceland on a budget. The bonus shops are identifiable by their yellow banner and the pig on their logo. Best to stock up on essentials here and pack lunches for long days. When you take tours you’ll often find service-station esque cafeterias or little food stands but expectedly the prices will be higher because of convenience. You can easily spend £20 on a basic hot meal. Save the money for a hot drink to warm you up instead!

Free Things to do in Reykjavik

What better way to save money on a travel in Iceland than finding activities in the city that cost absolutely nothing!

Street Art Walk

Reykjavik has colourful murals around every corner. Make sure you make time to explore all of the side streets.

Harpa concert Hall

The inside of Harpa Concert hall in Reykjavik, with geometrically patterned stained glass windows and mirrored ceiling tiles. Harpa is a good thing to do in Oceland on a budget.

Harpa is a very impressive piece of architecture and events venue in Reykjavik. Make sure you go inside to get a good look at the geometric stained glass windows.

Sun Voyager

Sun voyager sculpture in Reykjavik, a budget activity for the solo traveller.
Sun Voyager

This aluminium sculpture by artist Jón Gunnar Árnason, was intended as an ode to the sun, despite being reminiscent of a Viking long boat. It was the winner of a competition to design a piece of art to celebrate the city’s 200th anniversary. You can find this sculpture by the old harbour on Sæbrut, near Harpa Concert hall.


Hallgrimskirkja is again another piece of impressive architecture in Reykjavik. Whilst entrance to the church is completely free, the must see here is the church tower. Entrance to the tower via lift costs ISK 1000 (around £6) and boasts incredible views of the city.

Rainbow street

A rainbow painted street on Skólavörðustígur in Reykjavik. This is a great photo spot in Iceland for the budget traveller.

The rainbow street on Skólavörðustígur has been hand painted yearly by the citizens of Reykjavik for their Pride festival. Last year it became a long term feature of the street and is a great place to take photos in downtown.

Northern Lights Tours

The northern lights across a blue-green, starry sky in Iceland.

Even if you don’t self drive, luck permitting, it’s still easy to see the Aurora whilst you travel Iceland on a budget. Get Your Guide is my favourite place to compare tour prices. You’ll probably be surprised to find that you can get Northern Lights tours (and good ones) starting from around £30 (the same price I paid for a beer and a starter in a downtown bar…I know which I’d rather do again)! A good staple of most of the local tour companies is that they offer you a second tour free of charge if you don’t manage to see the lights the first time round!

I can recommend the Reykjavik Excursions Tour, where we saw the lights and they added a complimentary hotel drop off for us at the end of the night. Grayline also come highly recommended and offer combined tours. I managed to see the lights the first night with bus tours. is, however there is limited help available if you need a hand setting up for photography, and I didn’t have the best experience as a (anxious) solo traveller. That said, with the ticket price you also get entry to the Aurora museum, which is a budget win!

Self Driving Vs Tours

A stock photo of the Iceland ring road. Self driving is one way to travel Iceland on a budget.
To drive or not to drive, that is the question

I can’t speak much on this option as a solo traveller without a license. However, depending on how confident you are driving in a new country, road tripping around Iceland could be a good way to travel Iceland on a budget. I found this blog post by What Do You Sea useful for breaking down the costs.

To tour or not to tour seems to be the question I see most about Iceland online, particularly from solo travellers who may not be confident navigating on their own in a new country. And then there’s the fact that you don’t have the option to split petrol and car hire costs.

Considering all of this, I think there are some good tour options out there. To save more money in the long run and make the most of your time I’d recommend a multi day tour.

Here are the links to the multi-day tours I went for:

Contiki – 3 Day Iceland Tour

Arctic Adventures – 2 Day South Coast Tour

For details and reviews of these tours, check out my recent post on the best things to do in Iceland in the winter,

The Blue Lagoon & Alternatives

People swimming in the blue lagoon in Iceland. Find out cheaper alternatives to the blue lagoon when travelling Iceland on a budget.

Iceland is famous for its geothermal hot springs and spas, most notably the Blue Lagoon and the Secret Lagoon. I was lucky enough to have the Blue Lagoon included in my first Contiki tour, but it’s not the most budget friendly option out there. The majority of people who’ve been tend to think this is worth it, and I’ll agree that it was a relaxing and unique experience. However, I may have considered alternatives had it not been included.

How Much is the Blue Lagoon?

The comfort package starts from €49, if you are willing to visit in the evening at 8pm, which would give you 2 hours until the spa closes. This basic option includes the use of a towel, a silicone mud mask and one drink of choice (alcoholic or soft drinks).

Here are a few tips to save money on the Blue Lagoon if you choose to go anyway:

  • Take your own waterproof case. It’s essential if you want to take photos. They sell them there but you’ll probably save a few quid on Amazon.
  • Go for refills of the free clay mud mask instead of buying the other options
  • Take a refillable water bottle and use the water fountains scattered around to avoid buying drinks (the water is really warm so you will probably get thirsty)
  • Opt to visit the lagoon on the day you’re flying to or from Reykjavik. It’s closer to Keflavik airport than Reykjavik and you can include a drop off here on your airport transfer with Flybus
A person walking by the blue lagoon in Iceland.
You can walk along the unused part of the lagoon for free, but that wouldn’t be much fun, would it?

Other Options

There are plenty of other options out there that locals and tourists alike urge are just as good.

Secret Lagoon

The secret lagoon is a cheaper and natural (although the water is geothermally heated, the blue lagoon is man made) alternative. Prices start from £18 but unless you hire a car, you’ll need to get there too, which brings the cost up to £50+. Or you could combine it with a golden circle tour, which is more cost effective.

Local Pools

Even better value for your money, consider visiting some public pools instead. Locals and tourists alike highly recommend Laugardalslaug in central Reykjavik. Its the same water as the blue lagoon and includes a sauna and hot tubs, all for only 1,000 ISK (around £6). It’s also conveniently located a stones throw from central Reykjavik. I like to think that as a general rule, if the locals recommend it, it’s worth checking out.

For more natural options that will require access to a car and some hiking, including Reykjadalur thermal river and Seljavallalaug (both free), check out this article.

Getting Around Reykjavik

A stock photo of someone driving a bus. Taking the bus is a great option to travel Iceland on a budget.
Walking and taking the bus are the best transport options for budget Iceland travel without a car

There is no Uber in Reykjavik, and taxis can be very expensive, especially if you’re travelling alone. Whilst the central part of the city is largely walkable, local buses are great budget option if you want to go somewhere further out or want a lift to the BSI terminal. Strætó is the app for Bus travel within Reykjavik and is quite easy to use. You buy a ticket online via the app and show it when you get on the bus.

Thanks for Reading!

I hope you’ve picked up some useful tips on how to travel Iceland on a budget. Have any more questions about Iceland or solo travel? Drop me a comment below! If you enjoyed this post you might like to check out my DIY tour of Reykjavik’s street art, or my ultimate guide of things to do in Iceland in the winter.

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