The problem with staying on Alhambra hill is that it's hard to escape from the thousands of fellow tourists. Consider instead basing yourself in the Albaicin, the mysterious, white washed Moorish quarter that tumbles down the hillside opposite.
The Palacio is a 16thC mansion that manages to be both grand yet intimate, and combines the old and the new to great effect. Its centrepiece is its enclosed patio, where half-revealed frescoes - said to be by a student of Raphael - and marble pillars are offset by chic soft furnishings. Upstairs, wooden galleries decorated with modern art lead to striking, beamed bedrooms, furnished with wrought-iron beds and more art. Standard double rooms are generally small, however, so it might be worth splashing out on a suite. The grandest (the Alhambra) has a fabulous mudejar ceiling, while others have roof terraces with sensational views of the Alhambra over the Albaicinis jumble of terracotta roofs.
Unfortunately there are still problems here with 'missing' reservations: reconfirm before arriving.