Where to stay in Reykjavik: the best neighbourhoods and hotels

Laugavegur is Reykjavik's main shopping street and its social hub, a long, gently sloping strip of design shops, bakeries, bars and restaurants that gets pedestrianised in summer. At the top of Skólavörðustígur, the rainbow-painted street that climbs off it, stands Hallgrímskirkja, whose tower gives the best view in town.

Hotels here are stylish and sociable. Canopy by Hilton spreads across six connected houses and lends guests bikes; Alda and ION City sit right on Laugavegur; and Hotel Von is about five minutes' walk from Hallgrímskirkja. Weekend nights get loud, so light sleepers should ask for a room off the street.

The oldest part of Reykjavik clusters around Austurvöllur, a grassy square facing the parliament building, and the little streets of Kvosin that run down towards the harbour. Just south, Tjörnin is a lake full of swans and ducks, overlooked by City Hall and some of the city's prettiest old houses.

This is where Reykjavik's hotels have the most history. Hótel Borg is an Art Deco landmark steps from the shops; the Reykjavik Konsulat Hotel fills a former 1900s department store a short walk from Harpa; Hotel Reykjavik Saga is a stone's throw from the lake and the cathedral; and the boutique Holt is within easy walking distance of Tjörnin.

The waterfront has been transformed. Harpa, the honeycomb-glass concert hall, shimmers at the harbour's edge, whale-watching and puffin boats leave from the Old Harbour, and the Sun Voyager sculpture points out to sea along the shore path. West of the harbour, Grandi has turned old fish factories into galleries, food halls and bars.

The Reykjavik Edition is the city's glossiest address, with a spa and three bars. The Exeter Hotel combines a restored 1904 house with new buildings by the old harbour; the Reykjavik Marina sits next to a working dry dock; and Grandi by Center Hotels is a lively base in the creative quarter, with a bar and restaurant that are always buzzing.

East of downtown, Borgartún is Reykjavik's business district, and beyond it Laugardalur is a green valley of parks, sports grounds and the city's biggest outdoor geothermal pool, where locals gossip in the hot tubs year-round. It's a 15 to 20 minute walk to Laugavegur, and much easier if you have a car.

Hotels here are larger and often better value. Hilton Reykjavik offers complimentary parking a few minutes from Laugardalur; Hotel Island is a calm spa and wellness hotel with mountain views; the 16-storey Fosshotel Reykjavik, near Höfði House, has views over the bay; and the Grand Hotel Reykjavik is a big, quiet option with parking.

Reykjavik's neighbouring towns are worth a look if you're driving or travelling with children. Hafnarfjörður is a harbour town with lava fields, folklore and a Viking-themed hotel, about 15 minutes from the capital by bus. Kópavogur, Iceland's second-largest municipality, is quieter, greener and well placed for the ring road.

Hotel Viking in Hafnarfjörður is fun and full of character, with sea views; Hotel Kriunes is a homely, family-owned hotel overlooking a lake with mountain views; and 201 Hotel in Kópavogur's shopping district is a practical base with a fitness centre.

Keflavík International Airport sits on the Reykjanes Peninsula, about 45 km from Reykjavik, with the milky-blue Blue Lagoon in the lava fields between the two. Recent volcanic activity on the peninsula has closed the lagoon at times, so check before you go.

The Retreat at Blue Lagoon is a five-star spa hotel with its own private lagoon and the Moss restaurant. In Keflavík town, Hotel Keflavik is five minutes from the terminal, with the indulgent Diamond Suites on its top floor, and the Aurora Hotel is a simple option for a very early check-in.