I do some of my work in Arequipa and so have stayed in many hotels in Arequipa over the last several years and Azul Colonial Inn is undoubtedly the loveliest place I have stayed, and for the price cannot be beat. The hotel is about two blocks above the Yanahuara plaza, but it is within walking distance of the city center if that is where you want to go. The courtyard was quiet and beautifully appointed with colorful, comfy-looking couches. The room I stayed in was also beautiful and the bright colors were handled in a very tasteful way, making it cheerful, not garish. As essentially a solo business traveler I was a little frustrated that I could not get the free wifi connection to work on my laptop or smartphone, but someone was happy to help me turn on the computer in the lobby (I suspect it not being on was at the heart of the wifi issue).
The proprietor charged me 50% of one additional night when there was a mistake in my reservation, which made my stay less of a great deal (though still pretty exceptional). This was generous, given that by the terms of my reservation he was allowed to charge me 65% of the extra night. Given that there was no way to correct the reservation in advance, the error was small (one night), and the hotel was not full (so they were not turning away other business because of me), the more generous reaction might have been to simply accept the correction when I got there without the additional charge. But it was still reasonably generous and I can't blame him.
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