If your budget permits, an excellent place to stay in Madrid is the Casa de Madrid . It is located at Arrieta 2-2, across the street from the Teatro Real. I think there are 6 or 8 rooms/suites. I have stayed in three different ones and all are magnificent. Breakfast and other meals are available by arrangement. There is a salon available to all guests that fronts on Calle Arrieta and offers great people watching. The owner is Marta de Medina and she takes particular care of her guests, like no one I have ever met. You can walk to all major sites and nightlife. Enjoy!