Iceland is a place that people either seem to like or not. Personally I loved it there and really look forward to going back some time. The landscape is like nowhere else I've been, the food was quite good and the people, though reserved, were nice.

But if you want luxury, I think you'll find it elsewhere. There are decent properties in Iceland and some are obviously better than others. Some are even in the expensive range, but that most certainly does not put them in the luxury space.

In Reykyavik there's the Borg, the 1919 and even the Hilton. I'd say that's about it. Other than that the various Icelandair hotels scattered about the country would amongst the nicer places.