Let me recommend the Hotel Suecia in Madrid if you want an excellent accommodation in a quiet environment yet very close to all the excitement, right off the Calle de Alcala.
You can buy the
Bancotel coupons and for one coupon you can stay at this four star hotel. The coupons are worth 50 Euros each, and you use one per night at the Suecia, a bargain!
Take a look at the Bancotel program it is fantastic and affordable. I used it several years ago and stayed at the Suecia. It is a short walk to Kilometro Zero, and a short walk to the Museo del Prado.
I also dined at the Hotel Europa and I found the location very exciting, near a Corte Ingles, and filled with people, if you enjoy the hustle and bustle of crowds that's the place to be. Very noisy.
Saludos y buen viaje!