A further drive east along route 1 brought us to Hofn, where we overnighted at the very friendly International Youth Hostel. Dinner at Kaffi Hornio was excellent, especially the lobster crepe and lamb steak.
Hofn is but a smallish town, although it's the largest in this southeastern part of Iceland. The town itself is very tranquil, and everybody seems to be in some way connected to the fishing port in the town. From here, you also can catch a great glimpse of the gigantic Vatnajokull glacier. Down at the port, look out for a tall flagpole. I asked at the breakfast place and the kind lady told me, in her very limited English, that there's where the fishermen bring in their catch every day.