In between Thingvellir and Geysir/Gullfoss, you’ll come upon the quiet little town of Laugarvatn. Most drive through this town, or stop at the N1 gas station/post office/fast food/bus stop. There’s much more to see!
I lived in this town of about 400 in the summer of 2015 at the Gullkistan (gold chest, or treasure chest) Center for Creativity residency for dedicated time to work on my digital art. The residency is located just off the main road at the foot of the ridge, slightly to the east of the center of town. If you’re passing through at the end of a month, you might be able to catch the open studio event!
Next to the two buildings of the residency is a campground. It’s crowded on weekends when Icelanders come to the balmy south for their own vacations, and so is the town. There are also some events, like the all-terrain footrace around the lake, that take place every year and draw a crowd (and maybe some free hot dogs!).
The most visible landmark in Laugarvatn is the hip/boutique hostel in a former school building, standing above the lake with its green steep-peaked roof. Héraðsskólinn Hostel has a variety of rooms, but even if you aren’t staying, the café just inside and up the stairs (leave your shoes at the door and take a pair of slippers to keep your toes warm) is a nice place to grab good coffee, tea, a cake treat, or a nice sandwich. On June 17, Iceland’s equivalent of a national/independence day (peaceful independence from Denmark in 1944), a small parade of villagers processes to this landmark building for a short ceremony.
The formal/guidebook main attraction in Laugarvatn, which translates to “warm/bathing water lake,” is the Fontana Spa, on the shore of the lake. It is built fairly recently on the location of the geothermal vent steam bath that has been in use for hundreds of years. People would journey here from the meetings at Thingvellir for the steam and bathing. There are steam and water opportunities for relaxing, along with a high-spec small cafe with a health buffet and some prepared options. Some Golden Circle tours will include a stop here. They have recently built deck walkways over the lake, and you can walk into the water from the spa. Another draw for the spa is the rye bread cooked in small crocs in the sand near the geothermal venting on the shore! You can eat some from the café or help bury some along with a tasting.
If you’re a traveler on a budget, skip the fancy spa and have a soak at the public pool for a fraction of the cost. Located just feet away, you’ll get two big hot tubs and a 25 meter pool outdoors, along with a steam bath. There’s also a gym attached to the building. Locker rooms and showers are small and without privacy (other than the bathroom), but it’s not a busy place.
Be aware that at some times of the summer, midges are attracted to the geothermal lake. If you have a mosquito net that fits over/under a hat to cover your face, you may get good use of it here. The lake is home to some large trout, too.
The lake itself is shallow, with plenty of geothermal venting on the shore. You can drive/walk right down to the shore and see boiling mud and water on the black sand beach! There is a small trail around most of the lake (from the Fontana, I recommend finding it along the shore to the right, as the left will soon end in a marsh). There are a couple pebble beaches, and the small hostel along the main road rents boats. One of my favorite spots from my time there was following the trail along the lake to the right of the Fontana until it meets a creek, I spent hours sitting at this intersection. Can you see why?!
There are also some trails on the ridge side of the town, with clear entrances visible from the main roads (from 36 near the traffic circle, and from 365 just after it). You can ascend the ridge from these to get views like these:
There are a couple other restaurants and several places to stay in town, particularly a great coffee shop/café with interesting gallery and nice guesthouse rooms, Gallerí Laugarvatn, on the east side of town, on the lake side of the road. The Samkaup Strax is the place to pick up snacks or groceries (at a small town/small store markup), located with the N1 gas station (lake side of the road, in the middle of town on the main road).
If you are driving yourself, you’ve got to stop at Efstidalur II! There’s plenty to do here – you can stay on the farm, dine in the restaurant, get some fantastic coffee or organic homemade ice cream, pet some cute calves, and even take a guided horseback ride! There are often some farm dogs around, looking for attention as you consume your ice cream on the patio. The ice cream/café is open late (until 10, last I checked) so plan for some high quality, farm to table treats on your Golden Circle trip.
Next, on to Geysir and Gullfoss to round out the typical but necessary sights of the Golden Circle.