Hi, I did a quick search of Madridman's archives and found this thread that has info on hotels in Granada.
Many years ago, I stayed at Hostal Carlos V which is reviewed favourably in Concierge.com. You may want to have a look there. More expensive is the recently renovated Hotel Inglaterra which is extremely central. It was a comfortable if run down hotel when I was there in a previous lifetime and is now part of the NH chain. All the best! Plume