Old Dali Inn No. 5 Guesthouse

Cheap and acceptable. If you can stand the staff.
I stayed in a cheap private room, which had bamboo-walls. Rustic and charming, but they didn't reach the ceiling, which was odd. Of course this was the cheapest single they had -- they do have modern rooms and dorm rooms though. It sits near the entrance to the town, so it's relatively quiet and not at all far from the center. Right near the bus stations too, so going around the lake is a piece of cake. And the breakfast, a buffet, has a lot of treats to start the morning with. Unfortunately, the staff are not very nice. They're all young Chinese and most don't know english, which means they don't really care whether you're having a good time. On the whole I personally never had any problem with them though. However, there are better hostels in Dali. Look around first!

I didn't stay in this guesthouse but I used their travel service in Feb. '07 to book a bus to Kunming. They were very keen to show us a laminated photo of the so-called "luxury bus" that we were paying for. We were told we would be picked up in a minibus and taken to it. We were actually picked up by some bloke in a car and taken to the side of a road where the driver flagged down a cramped minibus that was nowhere near the luxury bus we had paid for, and proceeded to squeeze me and the other three similarly duped passengers into it for our five-hour journey. Not impressed!