After researching a few hostels and hotels in Panajachel, I chose Hotel El Sol and was not disappointed. I stayed in an 8-person Dorm for three days in the middle of June, and the room itself was quite spacious and very clean. It was also very quiet because the hotel is situated about 15, 20 minutes outside of the main area. So if you like walking, this place is definitely for you.
There weren't too many people in the Dorm as well - it sometimes felt like a private room to myself! There were at most 3 people at once, so I'd recommend choosing the Dorm (app.$7) over the private room ($20) unless you have a family or something, of course.
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