Unusual and experiential places to stay in Iceland on a budget

Iceland, the land of ice and fire, the place of otherwordly landscapes and majestic views, the home of most giving mother Earth and most furious nature forces. Even driving around the country is an experience itself, but staying in different places could be no less than an exciting thing. There are many unusual and experiential places to stay in Iceland, so you’ll be spoiled for choice.

Here comes the ‘but’ – but you need to have a huge budget to afford most of them. Bubble rooms, glass ice cabins, designer hotels – all of them so lovely and so breaking the bank. But we decided to go on a quest for affordable accommodation in Iceland, so here’s the result – our list of amazing places to stay on a budget.

Where to stay in Iceland - affordable and unusual accommodation

*We managed to stay in each of the below accommodations in August 2020 for under 75 euros a night for a double room, with no special discounts or deals. The average price per night we paid was 60 euros.

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Camping pods and troll hikes in Borgarnes

Camping Pod at Fossatún Camping Pods

As soon as we noticed the cute camping pods of Fossatun Camping, we knew we had to spend a night there. The campsite is located near the town of Borgarnes somewhat in the middle of the way between the capital Reykjavik and the Snaefellsnes peninsula. So you can stay there at the beginning or at the end of your trip to Iceland, or just as you get ready to explore the beautiful Snaefellsnes peninsula.

The wooden pods don’t look too big (Nace looks taller than them), but they are long enough to fit a double bed (even maybe 2 + 1 kid could fit), a couch, and a table, so you’ll have space for luggage and still feel like you’re camping. You can use your own sleeping bags or rent bed linen and towels. There are two shared kitchens, shared bathrooms and showers, and three lovely jacuzzis with hot mineral waters.

The owner of Fossatun Camping is Steinar Berg who is also a writer and you can find his troll books at the reception. He got inspired by the area so if you decide to take the troll hike around the camping grounds, you’ll learn a lot about the folklore and nature of Iceland and its mystical creations. You can also enjoy the mini-golf field nearby, but don’t forget about the jacuzzi. Definitely unusual accommodation and a great experience!

Where to stay in Iceland - affordable and unusual accommodation - Fossatun Camping Pods

Stay at a farm on the beach in Snaefellsnes peninsula

Neðri-Hóll Family Farm | Saudafell Guesthouse

Staying on a farm in Iceland is getting more and more popular, but when you combine a farm almost on the beach in the beautiful Snaefellsnes peninsula, the aroma of freshly baked cookies, and the opportunity to do so much in the area, you get to the Neðri-Hóll family farm.

The beach at the nearby Ytri Tunga is a popular place for spotting seals and if you’re lucky you might see seals nearby the farm itself. You can also try some of the home-produced food – e.g. milk and eggs. It’s better to stock up at some of the bigger supermarkets so you can use the kitchen and the farm and cook dinner, which you’ll enjoy in a peaceful setting.

You can arrange farm activities with your host – e.g. feeding the animals, milking the sheep, or other seasonal activities. Or just cuddle in bed and choose romance in Iceland.

Stay in Westfjords and the Old Sheriff’s renovated house in Isafjordur

Old Sheriff’s House | Tangs (for up to 5) and Sólheimar Studio Apartment (for up to 4)

A family decided to buy and renovate the Old Sheriff’s house in the biggest city of Wesfjords – Isadjordur. It’s one hell of a drive to get there, but all the bumpy gravel roads with unexpected views are worth it – your eyes and soul will sing after a day in one of the most otherwordly regions in Iceland. And it was time for another experiential stay.

Isafjordur is a very scenic place and it has a food scene so good some people drive half a day to just get dinner there. While we suggest taking the time to explore on foot, the Old Sheriff’s House was the perfect addition to our day – it’s renovated in a very lovely way, and our room was blue (pretty much everything in it) which was calming and relaxing. Plus we got to admire how even old houses can turn into charming places!

A vintage van and endless sunsets just north of Akureyri

Vintage Van with a stunning view, double, or family room at Arnarnes Paradise

We headed to Arnarnes not just because they said there would be the most beautiful sunset in Eyjafjörður fjord. We heard that there we might see elves but that was also not the main reason for our visit. We decided to stop by just north of Akureyri because there was a vintage van parked on the farm, waiting for us to sleep inside it. As we arrived by sunset, the sky took those amazing colors and the temperature had dropped to 3 degrees Celsius. The van had crossed the Icelandic countryside with its icy rivers and snowstorms, so it was ready for adventure. We, on the other hand, had experienced quite some cold in the last few days in Iceland.

Even though there were a heater and blankets in the van, we decided to take the offer made by our hosts and stay in one of the rooms in the boutique guesthouse. There was a huge cafeteria with many tables and shared showers and bathrooms for all the guests. All sheets were from organic cotton, and herbal aromas were flowing around, we took hot showers so we could sleep warm and happy like babies.

You can opt for a local organic breakfast (they collect the herbs for the tea from around!) or even go for aromatherapy or other treatment. The surrounding area is nice for a walk and you should be careful because there are could be birds nesting in some areas. We’ll have to come back to try to meet an elf! Or at least toughen up and finally sleep in the van!

Stay in the middle of a 300-years-old lava field and have a view over Lake Myvatn

Cozy cabin for 2 people at Hlíð Huts

Our time around Lake Myvatn and Iceland’s Diamond Ring started with staying at a real gem – tiny wooden cabins right in the middle of a 300-year-old lava field. The views toward the lake and the surrounding hills and lava were magical, the starry skies – dreamy! We could use the facilities of the Hlid Campsite but to be honest – we spent most of the time in our little wooden cabin and on its sundeck.

We even managed to take a good nap after the heaters did their job to warm us up – it was an especially windy summer day in Iceland. While watching the sunset and the fumes from the geothermal plant in the distance, we almost forgot the nasty Myvatn midges. We ate our dinner snacks on the tiny table in the room and enjoyed every bite. The most simple things are often the most fulfilling experiences. Those cabins in the lava fields were definitely one of the top unusual places we’ve stayed at.

Farm life north of Egilsstadir

Double room or triple room at Litlabjarg Guest House

For those who want to learn more about farm life and indulge in nature, there’s a beautiful farm just north of Egilsstadir. They can take you around the animals and if you dare, you can help with the work. On the other hand, there’s a beautiful sunny porch where horses might come to greet the guests.

We prepared a quick dinner in the shared kitchen, chatted with other travelers for a while, and said goodbye to the sun. Soft covers did the rest of the job so we slept on a cloud. By the way, the farm owners also knit traditional Icelandic wear and gifts so you can kill two birds with one stone – get a nice souvenir supporting a local business and feel warm with your new wool sweater.

Glamping in the valley near Vik

Bell tent for 2 or bell tent for 4 people at Canvas Glamping

Speaking of unusual places to stay in Iceland, one of the most experiential accommodations for us was the bell tent glamping. Don’t run away when you hear glamping – it doesn’t always have to be expensive, which was the case with Canvas Glamping in Iceland.

A few bell tents with double or with 4 beds are nestled just outside of Vik so you can even spot Reynisfjara rocks in the distance, the grazing sheep in the valley, and the endless sea. A stay at a glamping site comes always with a bit of luxury – in that case – heated beds. What’s best was the amazing view once you unzip the tent in the morning.

There are showers and bathrooms across the meadow and a huge barn that serves as a grande kitchen and a chillout area. We took advantage of the comfy sofa and settled to watch a movie. It’s nice to have the traditional feeling of a farm, the adventurousness of sleeping in a tent, and the convenience of a stove and Netflix.

Stay in Westman islands beneath volcanoes and wildlife

Rooms for up to 5 at Guesthouse Árný or this lovely glamping in Vestmannaeyjar

We found a house of a local who decided to rent it out and show visitors the beauty of Heimaey – the biggest and the only populated of the Westman (Vestmannaeyjar) islands. The house is within walking distance to most of the island’s places of interest – you can walk and hike up the Eldfell volcano cone that almost destroyed the island with an eruption in 1973. Westman Islands are home to many puffins so if you walk around and find green areas and rocks facing the sea, you’ll meet those cute birds.

The rooms in the house are themed and lovely decorated so you’ll enjoy great design, wooden paneling, lava, and Northern Lights touches, and hospitality. You can use the kitchen and hang out in the breakfast area. We loved the place and would definitely return there to discover more of the surrounding islands.

Those were our favorite experiential and unusual places to stay in Iceland that don’t break your budget. Let us know other cool accommodations so we can stay there when we visit the country next time!

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