Data sim with mobile or mobile hotspot ?

After your arrival buy an European SIM card which (1) supports data roaming with the EU, (2) can be recharched online by credit card wherever you may be, and (3) supports LTE standard for maximum speed (requires that your mobile phone does as well).

Put the SIM card into your mobile phone and configure your mobile phone as personal hotspot (tethering). Connect all your other devices via WiFi to your mobile phone.

All said is only necessary if you have no access to free WiFi which is very unlikely. I can speak about Vienna and Austria only, but free WiFi is virtually available anywhere. In Vienna it is provided on all major streets and places by the city, let alone all cafes and restaurants, all hotels, of course.

Do I require any documentation to buy data sim, being non-EU ?

In some countries you need a photo-id, e.g. a passport, to buy a prepaid SIM card.

Mobile hotspots use the same technology as a SIM card and a phone. I find them needlessly expensive vs. just buying a SIM myself. If you have a locked phone and can't use an EU SIM...or you have multiple people traveling together who will use a lot of data, then one of these might make more sense.

I have had great luck with my Dutch Vodafone SIM (bought on eBay, never used in the Netherlands - yet!) for use in several European countries. I use it in my Android phone and use the phone as a hotspot for my laptop when on trains, etc. It works great. I'd recommend it to you as well, except that understand that Vodafone technically doesn't allow the use of their SIM for hotspot (in a phone), but on an Android phone they can't block it for some reason. I've read that it may be blocked on an iPhone, however. Otherwise, you can read my write-up about the Vodafone SIM from last year (mostly still relevant). I used the SIM again in Portugal in May:

https://community.ricksteves.com/travel-forum/tech-tips/dutch-vodafone-sim-card-for-use-in-europe

That is very nice write-up. But I do not have Android phone. We are two and both of us have iphone 6 and 6+. So, need to figure out, what options I have

I've read only that the Dutch Vodafone SIM may not allow iPhones to share data as a hotspot. (Of course, without an iPhone to try it on, I have no way to say for sure.) Other SIM cards may/should allow hotspot with an iPhone.

Renting a mobile hotspot is a waste of money, given the abundance of free WiFi in cities, restaurants, coffeehouses, hotels, etc.