Luxury Iceland: The Best Lodges, Hotels and Unique Stays

Iceland's luxury accommodation market has developed rapidly over the past decade, moving far beyond the standard hotel model to include geothermal spa lodges, remote wilderness retreats, glass-roofed aurora cabins and converted historic farmsteads. For travellers whose priority is extraordinary accommodation as an experience in itself rather than simply a place to sleep, Iceland now offers options that rival anywhere in the world for originality and quality of setting.

Aurora Cabins

The single most coveted category of Iceland accommodation. Glass-roofed cabins or cabins with north-facing skylights designed specifically for aurora viewing from bed. The best examples are located away from light pollution on farms or remote land in North Iceland and the Reykjanes Peninsula. You lie in a heated cabin in a warm bed and watch the Northern Lights in real time without stepping outside. Prices range from GBP 350 to GBP 800 per night. Booking 3 to 6 months ahead is essential for the most popular properties during aurora season.

The Ion Adventure Hotel

Located near Thingvellir in the Golden Circle area, Ion Adventure Hotel is built against a black lava field with floor-to-ceiling windows looking out over the landscape. The architecture is modernist and dramatic, the spa extensive, and the restaurant serves high-quality Nordic-influenced cuisine using Icelandic ingredients. It is one of the most architecturally distinctive hotels in Iceland and sits within minutes of the most important historical site in the country.

Remote Wilderness Lodges

Several lodges in the Westfjords and East Fjords operate as genuine wilderness retreats — accessed by gravel roads, surrounded by uninhabited fjord landscape, with no nearby towns or services. Fosshotel Westfjords, located in Sudureyri, and various smaller operator properties combine high-quality accommodation with hiking, fishing, kayaking and cultural programmes. These are not for every traveller but provide an authentically remote Iceland experience unavailable near the Ring Road.

Geothermal Spa Accommodation

The Blue Lagoon's adjacent Retreat Hotel is the most expensive accommodation in Iceland — rooms from GBP 700 per night, with private lagoon access and extraordinary architecture. It is fully booked for months. Less well-known but exceptional: the Retreat at Myvatn, the Frost and Fire Hotel in Hveragerdi (on the geothermal river), and various small spa lodges on the Reykjanes Peninsula. These combine the geothermal bathing experience with accommodation at a single location.

Historic Farmsteads

Several of Iceland's oldest farms have been converted to high-quality guesthouse or boutique hotel accommodation while retaining their historical character. Efsti-Dalur in the Dalir region combines a working dairy farm, its own ice cream production, and accommodation in a beautifully renovated farmhouse. Bjarnarhofn on the Snaefellsnes Peninsula is Iceland's most famous shark farm and offers accommodation, a shark museum, and the most authentic agricultural Iceland experience available.

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