Regarding Granada Hostels, Pensions, & Hostales in Old Town Granada:

Below you'll find a complete list of cheap lodgings in Granada including hostels, pensions, & youth hostels. One can read reviews and recommendations of several of Granada's hostels in the "Hostels & Other Lodgings" forum of our ALL SPAIN Message Board. If you choose a lodging location next to the Alhambra you'll find it necessary to take a taxi to some of the farther parts of Granada City otherwise you'll be spending a large part of the day walking. Some of these MOST interesting places to visit include the Alhambra & Palacio del Generalife, Albaicín/Albayzin, Capilla Real, Cathedral, Casa de los Tiros, & El Bañuelo to name only a few.
Where to Stay in Granada? It's always best to stay inside or near Granada's Old Town, near the Granada Cathedral, Plaza Nueva, Barrio Realejo, Plaza Bib-Rambla, in the Albaicin-Albayzin, or along the "Cuesta de Gomérez" where there are many hostales near the foot of the Alhambra. From Granada's Old Town you can visit all of the city's most interesting sights within walking distance, including the Alhambra Sacromonte, and the Albaicin-Albayzin, and Cathedral among many. There are a number of hostales on Calle Navas where, among other things, there are dozens of tapas bars to spend your evenings.
During my las visits to Granada I stayed at 3 different inexpensive hostels, each having its own style. I feel comfortable recommending each based on price-point, location, and ammenities offered. Lower-cost establishments, in general, will never satisfy your every want, desire, or requirement but these did a pretty good job making my stay in Granada rather comfortable. These establishments, in chronological order of visit, were: Pension Austria, near Plaza Nueva, along the road to the Alhambra, Hostal Costa Azul, near Plaza Bib-Rambla and bar-filled Calle Navas, and Pension Veracruz, near the Palacio de Congresos. Nice!

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While in Granada, go see a Flamenco Show!

More Hostales & Pensions Granada Below

Hostal Atenas
near Granada Cathedral
Hostal Sonia
near Granada Cathedral
Pensión Londres
near Granada cathedral
Hostal Los Girasoles
400m from Granada Cathedral
Hostal Navas 14
Barrio Realejo, Calle Navas
Hostal Costa Azul
Barrio Realejo, near Calle Navas
Hostal Azahar
Barrio Realejo, near Alhambra
Pensión Posada Doña Lupe
entrance to Alhambra/parking
Pensión Meridiano
near García Lorca Park
¡ Su Pensión Aquí ! ¡ Su Hostal Aquí ! ¡ Su Pensión Aquí !
Hostal Camino Real
outer Granada, behind the Alhambra
Hostal Arroyo
near train station
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Hostal Verónica
near Puerta Real
Pension San Jose
near Puerta Real
Hostal Verona
near Puerta Real
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Hostal Antares
near Plaza Nueva
Hostal Landazur
near Plaza Nueva
Pension Austria
near Plaza Nueva
¡ Su Hostal Aquí !
Pensión Casa del Aljarife
Albaicín - Albayzin
¡ Su Hostal Aquí ! ¡ Su Hostal Aquí ! ¡ Su Pensión Aquí !
Hostal Lima
near Plaza de Trinidad
Hostal Nevada
near Plaza Trinidad
Hostal Meridiano
near Plaza Trinidad
¡ Su Hostal Aquí !
Hostal Nuevas Naciones
old university of Granada
Hostal Alcazaba
old University of Granada
Hostal San Joaquin
old Granada university
Hostal Fonda Sánchez
old Granada university

Hostels nearest to the Palacio de Congresos de Granada

Hostal Consul
near Acera del Darro
Hostal Los Arrayanes
near Acera del Darro
Hostal Casa Salvador
near Acera del Darro
Pensión Veracruz
near Acera del Darro
Hostal el Hidalgo
near Acera del Darro
¡ Su Hostal Aquí ! ¡ Su Pensión Aquí ! ¡ Su Hostal Aquí !

Youth Hostels in Granada City

Makuto Guesthouse Hostel
Granada Hostel
Granada train station RENFE
Oasis Backpackers' Hostel
near Granada Cathedral
Ziri Students Residence
near old Granada University