Continental Hostal,
This hotel is situated along the main street with the railway tracks running through. It's about a 5 minute walk from the Plaza along the tracks in the direction of Machu Picchu, just beyond the last restaurants on the left. The hostal has recently been renovated and all rooms have private bathroom. Still good value. South American Handbook "Good beds".

Rooms:
It was completely refurbished some years ago (2003) to increase room number and include private bathrooms in each.
The 16 or so rooms are small and humble, yet comfortable and not lacking some style (nor hot water). One of the best budget spots in town.