Wow I had high expectations of this hotel and it exceeded them. The rooms are really lovely and comfortable. The lobby is just beautiful and a great place to hang out. Breakfast on the roof is amazing. But the people who work there really make it even nicer - they were so accommodating and friendly and kind. There were 7 of us in our group, all in our 40's and 50's, and we all consider staying at this hotel one of our highlights of Peru.
Some bonus things they did for us: we were able to leave some of our luggage in our rooms while we hiked in Colca Canyon for 3 days and when we returned our luggage was waiting for us in the same rooms - I can't tell you how nice that was! We also ordered pizza two nights we were there and ate it in the lobby (we ate so well at lunch those two days we didn't have space to eat dinner out as well) and they took care of plates, etc for us. The day we flew out we had to be at the airport early and they had coffee waiting for us (we drank a lot of coffee there).
The only bad thing was probably out of Casa Arequipa's control but there was a party nearby the last night we were there (It was unclear to me if the party was next door at the school or up on the roof) and a few of my friends didn't get much sleep because of the noise.