Though most tourist-oriented hostels in Kathmandu are concentrated in Thamel, two other cities (Patan/Lalitpur and Bhaktapur) offer budget accommodations for backpackers.
Thamel, which lies at Kathmandu Valley’s urban core, is a shopper’s paradise. Hostels in the area are usually situated next or within three minutes walk to shops, travel agencies, convenience stores, bars and restaurants. From precious stones to Yak wool and pashmina shawls, Thamel offers a fine variety of local artifacts—though Bhaktipur is the place to go for Tibetan artifacts and artisanal finds.
Hostels at Bhaktipur are generally affordable but a bit pricey than those in Patan. The district is an hour away by bus from Kathmandu city proper. Artisans and skilled craftsman populate the district so expect first-rate articles from this area.
Patan hostels are concentrated near Patan Durbar Square, with shops for sari, shawls and jewelries surrounding the place. Tuktuks are plenty and can be found along the Square. It usually takes less than half an hour to go to the urban core.
Wireless internet access is available in most hostels and are provided for free. Cafes in Thamel offer free wi-fi and some have charging sockets for traveling professionals. Hot and cold shower is also a fixture. Though theft is not a common occurrence in Nepal as it is in India, high degree of caution is still advisable especially in Thamel.
A convenient stay in Kathmandu is a perfect start before you hit the Himalayas. Travel agencies and trekking shops abound in Thamel though trekking gears and permit can be obtained in Pokhara as well.
Kathmandu is still awesome, but Freak St. just isn't what it used to be. Bummer.