Iceland must be one of the most expensive places to have a holiday. Despite that, it is worth a visit for its striking and stark natural beauty, geothermal hot springs, majestic waterfalls and distinctive volcanic landscape. It is expensive, but with that affluence comes a place with a high quality of accommodation and services. It is also very safe for travelers from a crime perspective. The biggest risk to tourists is underestimating the unpredictable weather.

If you don’t believe that Iceland is expensive, here are some examples!

• Cappuccino at a cafe in a rural area 750 IKR / £4.40GBP / $8.50AUD
• Cinnamon scroll at a cafe in a rural area 950 IKR / £5.60GBP / $10.76AUD
• Raspberry Danish at a cafe in central Reykjavik 720 IKR / £4.30GBP / $8.15AUD
• Mains at restaurant Fridheimer 2210 – 4980 IKR / £13 – £29.50GBP / $25.05 – $56.40AUD
• Dessert at restaurant Fridheimer 1780 IKR / £10.55GBP / $20.20AUD
• Price of petrol 294.9 – 331IKR/L depending on rural or city (£1.75 – £1.96GBP/L / $3.34 – $3.75AUD/L
• Bananas 418 IKR/kg / £2.47GBP/kg / $4.75AUD/kg
• 500g Skyr (Icelandic yoghurt) 436 IKR / £2.60GBP / $4.95AUD
• 190g jar basil pesto 198 IKR / £1.20GBP / $2.25AUD
• 1kg dried pasta 359 IKR / £2.15GBP / $4.10AUD
• 375g bacon 829 IKR / £4.95GBP / $9.40AUD
• 1L whole milk 211 IKR / £1.25GBP / $2.40AUD
• 10 slices of cheese 999 IKR / £5.95GBP / $11.35AUD

Notes: All prices as of October 2023 and all grocery prices are from Kronan. Kronan and Bonus are the 2 cheapest supermarket chains in Iceland.

Here are some strategies you could employ to keep the costs down.

FLIGHTS

• Keep a lookout for cheap flights. Flights to Iceland are often on sale or there are flights to other locations that use Iceland a stopover point. Extend the stopover to allow yourself a chance to experience the country. Skyscanner is a reliable comparison website but always book with the airline direct. This helps a lot if there are issues with the flight such as booking changes or cancellations. Much easier to deal directly with the carrier rather than a third party.

ACCOMMODATION

• Pay for self catering accommodation. Eating out is the most expensive aspect of visiting Iceland. Whilst self catering accommodation may cost more, it pays for itself if you avoid eating out.
• Find friends to share accommodation with. For example, the per-person cost of accommodation goes down if you have a group of 4. In October 2023, we could find self catering accommodation for 4 people at about £34 – £43GBP/night.
• Shop around for the best prices of accommodation.

TRANSPORT

• Iceland is a car-centric country and it is almost not worth visiting if you do not have a car to get around in.
• Fill your car with people and thereby reducing the cost of car rental per person.
• Shop around for the best price car rental. The prices vary significantly. We used Northbound and got a good price with no issues.
• Take care when driving your rental car. The wind is very strong and there are many cases where a gust of strong wind catches the car door , snapping it back and damaging it. Drive slowly on gravel roads to avoid stones flying up onto the paintwork or windscreen of the vehicle.
• Check the weather and for road conditions and/or road closures. Drive within your limits and as the weather dictates to avoid damaging your rental vehicle or requiring rescue yourself. Both could end up being very expensive!
• Additional insurance for the rental vehicle is usually more affordable via a 3rd party.
• Check your credit card as there may be some level of car rental insurance included.
• Check the fuel prices and strategically consider how you fill up. There is a large difference in the fuel price between rural areas vs in Reykjavik city. The rental company may also provide fuel discount tokens but this may not necessarily mean that brand has the cheapest fuel overall.
• Pay attention. Whilst we were there, we saw a lady run her rental car with some force into a bollard. The front of her car was crumpled in. It was raining quite hard so perhaps she was distracted. Regardless of why it happened, it was clear that the accident will be very costly and upset her trip.
• Rent a car from Keflavik Airport. For multiple people, it is costly to catch public transport into Reykjavik and Reykjavik is not a large city. After one day wandering about Reykjavik on foot, you will want a car to do some sightseeing further afield.

FOOD AND DRINK

• The cheapest supermarkets are Bonus, closely followed by Kronan. The other chains and convenience stores are more expensive. Be aware of the short supermarket opening hours.
• Self catering instead of eating out will save you loads of money.
• Don’t be too concerned about missing out on Icelandic cuisine. Iceland does not have a strong food culture. Their history is one of survival on an extremely harsh climate and landscape so their “typical” foods says more about survival and ingenuity rather than deliciousness.
• That said, the quality of both food and service is high when eating out in Iceland. The price is very high too!
• Instead of eating full meals out, you can treat yourself to a small baked good at a bakery to keep costs down.
• If you want to try a few Icelandic specialties like lamb soup, do your research beforehand. In Reykjavik we ate at Icelandic Street Food where we had refillable bowls of Icelandic shellfish soup, lamb soup or spicy tomato soup and unlimited bread. This cost 2400 IKR / £14.25GBP / $27.20AUD. Yes, it’s very expensive for just soup and bread!
• For a blow-out meal, Fridheimer is a good recommendation. It is located on the Golden Circle and it’s an atmospheric restaurant located in a greenhouse warmed by geothermal water. They grow tonnes of tomatoes and their specialty is their tomato soup and fresh homemade bread.

ATTRACTIONS

• There are plenty of free attractions around Iceland to visit. Waterfalls, hiking trails, geothermal areas and geysers are set up for tourists with good infrastructure and trails. Many of the bigger attractions even have toilet facilities.
• There are parking fees are some of the attractions.
• A “must-do” for Iceland is to have a soak in geothermal waters. The most famous is the Blue Lagoon which will set you back £86GBP ($164AUD). One option is to visit Blue Lagoon’s cheaper cousin, Sky Lagoon for £47GBP ($89AUD). These prices are the average price for most of the day and for the cheapest package. Cheaper tickets are available for odd times like very early or very late in the day. There are also plenty of upselling at both these places and you can include all kinds of extra services by paying more.
• We went to Sky Lagoon and whilst it was a lovely experience, it was clearly built to cater to tourists and is not attended by locals. It probably does not reflect the way Iocals enjoy their bathing traditions. There are plenty of local pools which are much, much cheaper and catered to the locals. There are also various free hot geothermal baths dotted around the countryside on private properties. These would be a much more cost effective way to enjoy the thermal waters.
• One such example is the Reykjadalur Hot Spring Thermal River which requires a good 3km hike to reach. When you get there, you can soak in a warm river adjusting the temperature to your preference by moving yourself upstream or downstream. In October, there wasn’t too many people there and only a few people who were willing to brave the cold and wind chill to strip off and get into the warm water. The 3km hike would have been easy except for the unbelievably strong wind that threatened at times to blow us physically off the trail.

Iceland is expensive but it is unlike any other destination. In a group of 4, for an 8 night holiday from London with a rental car and self catering accommodation we managed to keep the costs to around £800 – £850 per person.