You might as well know this right away, Iceland is an expensive destination. Accommodation, food, transport, activities, everything has a cost which you must estimate so as not to find yourself in difficulty once over there. If your budget can easily sky-rocket, it can also be kept well under control depending on your choices, for, in Iceland, nature is free of charge and if you choose a certain type of accommodation and transport over another, prices will plummet. A general survey of the prices that you will encounter while on a trip to Iceland.
Iceland was a destination that was almost impossible to afford before the 2008 crisis. After the crisis, the Icelandic crown collapsed and there emerged a time when prices were affordable. Expensive but affordable... Then as Iceland rose out of the crisis, so did its prices.
You ought to be aware that in Iceland there are two seasons: the peak season for both tourists and prices, from May to September, and the rest of the year. Prices can drop by as much as 20 to 30% in the low season as compared to the peak season.
Iceland offers all kinds of accommodation, from youth hostels to luxury hotels. The most common types of accommodation are farms and guesthouses. In summer, from June to September, a good way to keep your budget down is to resort to camping. It is possible to hire your equipment on the spot. Remember to be fully equipped against the cold, even in the heart of August! For accommodation in a double room allow 15,000 to 22,000ISK (80 to 120£) on average.
In Iceland, hiring a car can quickly hike up the price of your trip, especially if you opt for a 4x4. This last is mostly useful in winter, when there is snow and frost and in summer, if you travel across the inland tracks. Remember to book ahead to take advantage of the best prices. If you stay on the n°1main road, a saloon car will do just fine.
The bus system is well-developed and in summer especially, it is possible to go everywhere on the island. Fares are not cheap, but bus passes exist. It is also a good way to go into the hinterland without having to drive a 4x4 and negotiate difficult roads.
As a last option, hitch-hiking can prove quite effective, often paying off thanks to the kindness of the locals and as the country is reasonably free of danger it is worth a try. The only risk: that nobody drives by!
In Iceland, eating out can put quite a dent in your budget. Expect to easily pay 3,000 to 4,000ISK (16 to 24£) for a single dish and 7,400ISK (40£) for a meal. Fresh and local products are often very good and you should at least test one or two particular places to taste the lamb and fish in particular.
Icelanders have picked up the junk food of Americans stationed on the island and so you will find burgers and hot-dogs in every petrol station - not expensive, but not necessarily healthy either!
Lastly, it is possible to buy food and do your own cooking in many guesthouses and so make as many picnic lunches as you can.
In the morning, the breakfast served in your place of accommodation is often very good and plentiful, made up of cheese, tomatoes, cucumbers, cereal, black bread... An ideal way to start the day, do not miss out on this!