I have not stayed at this hostal, but in response to the presence of a sex shop, you need to realize that Spain is different than the US. In the US, the presence of a sex shop would indicate a 'bad' neighborhood, but in Spain they are often found intermingled in upscale areas.

I stay at hostals because of the personal interaction they provide. I am female and have either been in Spain alone or with my kids the last few times. The hostals help me be safe and give me a connection that would not exist in a hotel. Last year when I was staying at one hostal, the owner stopped me and had me leave my purse behind because I was going to El Rastro. I valued her advise and appreciated her concern.