Is Iceland really as expensive, or have things been largely exaggerated? And how can you save some money on your trip to stretch your budget and perhaps extend your stay? We answer all of these questions and more.
Staying vs. Visiting
Firstly, it is important to understand that there is a difference between staying in Iceland and just visiting Iceland. Locals will tell you that they are often told that things are expensive on the island, but that they don’t actually feel the punch as much.
That is because employees are well-paid here on the island, and what they earn is in line with the cost of living here. It’s only visitors that need to properly budget (especially for certain items) when planning a trip to Iceland.
What Makes Iceland Expensive?
There are a few things that impact prices (or our perceptions thereof) in Iceland. They are the following:
Just like anywhere else in the world, you’ll find that Iceland also has its so-called tourist peak season. And the peak season brings with it peak season prices. Here on the island, peak season is during our summer months (from June to September).
Where You’re From
If you’re visiting from the US or the UK, you might feel the pinch of our steeper prices, but it generally won’t be too painful swiping that bank card. But imagine if you’re visiting from places such as India, South Africa, or Brazil. The exchange rates may leave you feeling that you just paid a month’s rent for dinner!
The Size of the Party Traveling
A trip to anywhere generally works out cheaper when you’re a bigger group traveling together. That way, you can share the costs. The same goes for the cost of traveling to Iceland. For example, when it comes to accommodation, the price per person sharing will always be slightly less than what you’re charged as a solo traveler.
How Long the Trip is
This one should be pretty obvious. The longer you stay, the more money you’ll need to spend and the more expensive your trip will be.
Your Perceptions of How Expensive Iceland is to Visit
You might not have done your research at all and may be expecting Thailand prices where a t-shirt is $5. If that is the level of expectation, you will surely be in for a shocking revelation. But if you’re expecting a holiday on par with shopping at Harrods, you might actually be pleasantly surprised.
Iceland is a Small, Sub-arctic Island
Iceland has managed to be pretty self-sustainable for a small, sub-arctic island. It is currently producing about 65% of all produce themselves. But the rest still needs to be imported from places such as Germany, the UK, the US, and Norway. Importation cost is no joke, and the consumer is left to absorb these extra costs.
More Expensive Employee Overheads
As we’ve already touched on, employees get paid well here on the island. This is because Iceland places an incredibly high value on workers and follows strict labor practices. In fact, 92% of the entire working force is unionized! With no exploitation on the island, products and services need to absorb these more expensive employee overheads. Unsurprisingly, the consumer is essentially left with the bill.
Iceland has much higher taxation than other countries. For example, where Germany has VAT ranging between 7-19%, Iceland has VAT that ranges between 11-24%! This obviously also has a major impact on the price one pays for a product or service. The only silver lining here is that some visitors may be eligible for VAT refunds.
Supply and Demand
If I have a shop in the US with millions of people walking across my threshold each year, I won’t need to rely much on product prices to keep the business afloat. I’ll be selling more than enough. But Iceland is a tiny island that has a population of less than 400,000.
So, you can imagine, there’s not a lot of foot traffic through your business, especially during the down season. If you’re well aware of the fact that you’re more than likely going to be selling only one item this week vs. ten, you’ll have to add more overhead expenses to the price tag just to keep the doors open.
Supply and Demand – the Opposite Side of the Spectrum
Where locals usually need to add all sorts of costs and expenses to the price of products and services to keep the business going, the opposite happens during peak season. It has been noted that the island sees a population increase of almost 40% during peak season. As a small island with limited resources, it’s not an easy task to keep up with the sudden surge in demand. This scarcity vs. high-demand issue also inflates prices.
How Expensive is Iceland?
You can’t budget if you don’t know what you need to work with in the first place. So, we’ve created this handy overview of what you can expect in terms of cost when you go to Iceland:
The following will give you an idea of what to budget for the basics:
The price of a round-trip to Iceland differs depending on where you’re from (the distance to Iceland) and prices can also fluctuate based on the season. The following should give you a rough idea of the average cost of a trip to Iceland (a round-trip ticket):
- Canada to Iceland = $1000 per person
- US to Iceland = $800 per person
- India to Iceland = $1200 per person
Accommodation will always be the most expensive part of any trip. Luckily, there is a wide variety of accommodation to choose from that will suit both your preferences as well as your pocket. You can expect the following accommodation price ranges:
- A hostel/backpackers = $35-$50 per person per night
- A hotel = $100 - $300 per room per night
- Airbnb = $200 - $300 per unit per night
- Campsites = $10 - $20 per person per night
Also, keep in mind what we said about larger groups. If you are a group of 6, renting an entire house might actually be a pretty affordable option.
You’ll obviously need to get around on the island. Please note that although public transport is available, it’s not anywhere near what you’re used to in the UK or the US. If you intend to explore the more remote regions of the island, your best option will be to rent a car in Reykjavík. The following should give you a good idea of the various transport costs:
- Car rental = $40-$50 per day + $90-$100 per full tank of gas
- Public bus = $3.50
- Public ferry = $13.50
- Airport shuttle = $35
Whether dining in or going the self-catering route, these are the expenses you’re looking at:
- The self-catering/grocery route = $15 per person per day
- Restaurants = $25-$30 per meal
With the self-catering option, it once again pays off if you’re a bigger group.
Cost of things to Do and See
There is plenty to do and see around the island and self-drive day tours one can take from Reykjavík. And although you’ll find that many, such as Hallgrimskirkja and the waterfalls, are free to visit, others come with a bit of a price tag. This is what you can expect to pay for attractions and activities in Iceland:
We believe that there is no better way to explore the island than to make a road trip out of it. You will find many popular road trip routes all across Iceland such as the Diamond Circle and the Ring Road.
What you spend on your road trip will depend on the route(s) you choose and the distance and type of road you’ll be traveling. But when taking gas prices in Iceland and activities and sights along the route into consideration, you can plan to spend about $720-$900 per person. That's when sharing (if you’re two). Or $1070 - $1300 if you’re road-tripping solo.
The Blue Lagoon
Due to the volcanic activity on the island heating up the underground water supply, you will find many hot springs in Iceland. Some of these hot springs have been utilized to create geothermal pools. One of the most famous among these geothermal pools is the Blue Lagoon.
In fact, because of its unique aesthetic, it has actually graced the big screen in movies such as Star Trek and Hostel. The Blue Lagoon has a variety of packages to choose from. So, if this is one of the places you’d like to tick off on your bucket list, the following is what you’ll need to budget for:
- Blue Lagoon Comfort Package. Entry, mud mask, use of towel, drink = $59
- Blue Lagoon Premium Package. Entrance, mud mask + 2 additional, use of towel, drink, use of bathrobe, a glass of sparkling wine = $76
- Retreat Spa Luxury Package. 5 hrs access to the spa, private changing room, unlimited access to the exclusive Retreat Lagoon as well as the Blue Lagoon = $408
- Airport Shuttle direct to Blue Lagoon = $23
Price of Guided Tours
Certain activities and attractions on the island can only be done via a guided tour in Iceland. The following should give you a good idea of what you’ll spend on some of these:
Whale Watching Tour
Whales can be seen all year round along the coast of Iceland. However, sightings really level up between April and September, when many migratory whale species also make the island their home. Going on a whale watching tour, especially in Husavik (the so-called whale capital of Iceland), is an experience you won’t soon forget.
- Whale watching tour cost: $90 - $150 per person per tour
Please just take note that this is a seasonal activity and most ice caves will be closed during the warmer months (ice melts, remember?) Exploring one of the ice caves in Iceland is definitely one for the books! As walking completely surrounded by walls of glassy blue ice is something that one can’t describe in words.
- Ice cave tour costs: $150 - $300 per person per tour
How to Save Money on Your Iceland Trip
If this is your first visit to the island, the following tips will help you save on your budget:
Get a Camping Card
We can all agree that camping is one of the most affordable accommodation options in Iceland. But if you want to get even more bang for your buck, you need to get yourself a Camping Card. This card will only cost you €159 and will grant a family of 2 adults and up to 4 children access to various campsites across the island for 28 nights!
Ask Your Rental Agent for Discounts
When picking up your rental, ask your rental agency if they have any special deals available for their customers. Rental agencies often partner up with local businesses, and you’re more than likely to walk out with a handful of vouchers and even a gas token.
Be Careful Where You Fill Up
In Iceland, gas prices are not the same, and you will pay more or less depending on where you fill up. Ask your rental agent and speak to a few locals, and they’ll be happy to divulge where all the go-to gas stations are.
Don’t Buy Bottled Water
You will definitely get some looks if you purchase bottled water here on the island. That’s because our water here is probably higher quality than your bottled water could ever be. All you need to do is bring along (or buy) a water bottle that you can simply top up as you go.
So, is Iceland Really Expensive to Travel to?
As you can see, there definitely is some truth in the general belief that Iceland is expensive to visit. But the reasons, therefore, are understandable. It’s also pretty easy to manage these costs, and you can choose whether you wish to splurge or go the more affordable route on your trip. With the right mindset and the right budgeting, you’re in for the adventure of a lifetime when visiting the island.