The Palace Hostel - Schlossherberge probably offers the best view of Vienna. It is located little bit away from the city centre, on a hill, overlooking the city. The view is absolutely gorgeous. This hostel has the feel more of a hotel than a hostel. The hostel is more of a quiet, family-oriented hostel than a party/social hostel.
From the city, you will need to take U3 (underground Orange line) to Ottakring (end of the line) then bus 46 or 146 to 'Schloss Wilhelminenberg. The directions given by the hostel is perfect. It is well connected by public transport. It takes just over a half-hour from the city center. The hostel is right next to a hotel with the same name. Parking spaces are also available in the hostel. There is no grocery store near the hostel -- you will have to go to Ottakring to find one. There is a local restaurant nearby with very good Austrian food, but it's slightly expensive.
All the dorm rooms are four-bed with two wooden bunk beds. Rooms are very clean, not crammed -- and you may get a room with a great view of the city. There is key card access to rooms. Bathroom, including the shower, is located in the room. Rooms are equipped with two lockers, one for the large backpack and one a little bit smaller for other day-to-day things. This hostel has the best lockers we encountered in Europe. Bathrooms are clean as well -- nice shower with hooks for clothes and space for soap and shampoo.
This hostel is more like a hotel than a typical hostel. There is a game room with TV, ping pong, and foosball tables. The breakfast area is relatively large and garden is great for relaxing and sunbathing. There is also a minigolf court and volleyball net outside. There are two computers with internet access for free.
This is definitely not a party hostel. It is rather quiet and there were many kids when we were there. The breakfast is reasonably good, with bread, buns, and cereal with variety of spread. Also it has a variety of hot drinks thanks to the machine.
The Palace Hostel - Schlossherberge is one of the best hostels we stayed at in Europe. If you like a hostel with the feel of a hotel, this would be it. Only negative would be that it is bit far from the city center, even though it is well connected by public transport. Also, if you are really looking to chill out in the hostel and meet lots of other backpackers, this may not be the best choice in Vienna. We would strongly recommend this hostel.
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June 2007