The Macia Real de la Alhambra is an excellent hotel for those visiting Granada with a car. The hotel has ample parking and the price is reasonable (8 euros a night as of Dec. 2007). It is especially convenient for getting to the parking at the Alhambra, because the hotel is next to the main access road for all Alhambra parking areas.
I don't know if I would recommend the hotel for someone traveling without a car, because there is nothing to do in the immediate area. The Alhambra is technically within walking distance, but the walk is long and up a steep incline, and along much of the route there is no sidewalk, so you're walking alongside a fairly busy street. There are buses, but I didn't see them running very frequently.
As for the hotel itself, it is very comfortable and quite new. The whole hotel has a very modern aesthetic that I found appealing. Even so, the vanity mirror in our room was broken (it hung down at an angle where it couldn't be used) and the covering of one of the ceiling light fixtures was hanging off at one end, which makes me wonder if the workmanship was a little shoddy.
Despite those small problems, this is a good hotel for those who come to Granada by car and are looking for comfort and style at a bargain price. I would certainly stay here again.