Looking for affordable and coolest accommodation along the south coast of Iceland? This list explores the best hostels in this exciting region.

South Iceland has long been a popular region in the country for visitors – and with good reason. The ring road leads travellers past black sand beaches, epic glaciers, rushing rivers and waterfalls crashing over the highland shelf. While it is busy, that doesn’t mean the region isn’t untouched in places; you never have to go far to escape the crowds. It’s a wide and diverse place and staying a few nights doesn’t have to break the bank. Here are the best hostels in South Iceland.

Where to Stay in South Iceland

Fljótsdalur HI Hostel
If you’re looking for a peaceful spot to stay, slow down and spend a few days, then the Fljótsdalur HI Hostel is the perfect choice. This hostel is a renovated farmhouse deep in the countryside, complete with a turf roof. Don’t expect the more modern luxuries of the other hostels on this list; this is a unique experience. The renovated farmhouse has retained all its charms, with a lovely garden featuring a BBQ and a gravity-fed outdoor shower. Bookworms and history buffs will love the hostel library, which holds over 2,000 books on Iceland’s history, geography, geology, flora and fauna (the majority in English). The beds are comfortable, and the whole hostel is a small and cosy - prepare to get to know your fellow guests. Make sure to stock up on groceries before you arrive, as there are no restaurants or supermarkets nearby. This is the end of the road. But the best thing? There’s no Wi-Fi here – it really is an escape.
Those that come here are looking to disconnect, escape the crowds, and hike. When you’re not wrapped up with a good book in the sitting room, there’s a popular nearby trail up the mountain Thórólfsfell (4-hour round trip). The reward from its peak is a magnificent view of the three glaciers nearby: Mýrdalsjökull, Tindfjallajökull, and Eyjafjallajökull. There are also longer multi-day hikes; the scenery at the edge of the highlands is incredible. Undertaking these requires the utmost planning and care – always make sure to log your itinerary with Safe Travel. 
Vestmannaeyjar HI Hostel
If you’re planning on travelling out to the Westman Islands, then the Vestmannaeyjar HI Hostel in town is the best option for an affordable few nights. Located on a quiet street in the middle of town, it’s both well connected to anything you’ll want to see in town and close to some nearby walking trails. Dorms and private rooms come with access to a shared kitchen, allowing you to pick up groceries from nearby supermarkets to cook your own dinner. But, the restaurants on the island are some of the best outside of Reykjavik; you shouldn’t leave without at least sampling one or two.
The Westman Islands are a volcanic archipelago made up of 14 islands located off the south coast of the country, known for their astounding birdlife. In 1973 the Eldfell volcano on the island erupted, causing an evacuation of the entire island. The award-winning exhibition on this event at the Eldheimar Museum is an absolute must-see while on the island. It’s within easy walking distance of the hostel, as is the trail that leads to the top of the Eldfell volcano.  
The other popular activities on the island include boat tours to see the bird colonies, which swarm over the cliffs during the summer. More recently, the island has become home to two rescued beluga whales. The Beluga Whale Sanctuary is a world-first, providing these former captive whales with a new, more natural home in Klettsvík Bay. The two whales are Little White and Little Grey, transported by land, sea and air all the way from Shanghai. Visits via boats to the harbour where they live will be available soon – for now, one can learn about them at the visitor’s centre.
Skógar HI Hostel
Known mainly for the idyllic waterfall of Skogafoss, the settlement of Skógar is one of the prettiest spots in all Iceland. The Skógar HI Hostel is the cheapest accommodation near Skogafoss, and a great place to stay in the area. Six person dorms and private rooms sleeping from two to five people make up this renovated old school building, perfect for a short or long stay. The hostel is perfect for hikers going over the Fimmvörðurháls Pass into Thórsmörk; expect an adventurous crowd of people staying here. There’s a shared kitchen, but also a restaurant attached that serves up delicious and affordable meals, snacks, and drinks.
Skogafoss of course is the main focal point in the area, a picture-perfect waterfall crashing over the highland shelf into the river below. The cliffs are mossy and green, with lots of birds nesting on the craggy face. A steep staircase leads up the side of the falls, allowing a view from the top and further access to the Fimmvörðurháls Pass. From the vantage point above Skogafoss, you can enjoy the view of the surrounding landscapes, wide-open green pastures all the way towards the distant ocean. There’s also another waterfall nearby, which has long been undiscovered by visitors to the area. Head to the east, past the Skógar Folk Museum (which is also worth a visit) to discover a small canyon that leads to Kvernufoss. Like Seljalandsfoss further west, it’s a waterfall that you can walk behind – just be careful of the slippery paths.
In the wider area around Skogafoss you can find the geothermal pool Seljavallalaug, an outdoor pool hidden within a valley at the base of Eyjafjallajökull. Built in 1923, the pool used to be a place where kids would learn to swim. It’s also easy to visit the waterfall Seljalandsfoss, and the sights around Vík: Reynisfjara black sand beach and Dyrhólaey Peninsula.
Vík HI Hostel
Vík is a popular stop along the ring road, the coastal hamlet attracting a lot of attention thanks to its spectacular surrounds. Vík HI Hostel provides a cosy and comfortable stay on the hill behind town, commanding outstanding views of the surrounding landscapes. From the high vantage point, you can see the cliffs of Reynisdrangar jutting up off the coast, and you’re closer than anyone else in town to the icy tongues of the glacier Mýrdalsjökull. At the hostel there are dorm rooms, private doubles and family rooms, and a handful of cottages for rent with their own private bathrooms and kitchenettes. 
There’s no shortage of things to do in Vík - it’s a great place to slow down and spend a few days. Glacier tours are organized from the hostel, as are hiking trips to the remote Remundargil Canyon at the base of the glacier. Around Vik are magnificent black sand beaches, the most famous being Reynisfjara Beach, a filming location for the movie Star Wars and TV series Game of Thrones. Up on the Dyrhólaey Peninsula are great views over the long beach, and it’s also home to a puffin colony in the summer months. There are also paragliding tours for even more aerial views of the spectacular landscapes.
In town, Vík has slowly caught up to the number of tourists that visit. There are several great places to eat, a craft beer brewery, and some lovely cafés. But the star of the town is now the Lava Show. In this live show, you’ll see molten lava up close as you learn about the catastrophic eruption of the volcano Katla in 1918.

James Taylor is a travel journalist from Australia who lived in Iceland for three years.

Falling in love with the country, he began to write about his travels for magazines and websites in Australia, Europe and the U.S.A.