As far as I know you cannot use a hotel or hostal as proof of address . You would have to be renting accomodation and be able to provide proof of that . I have heard that you can say that you're staying at a friend's house/apartment but that you're "friend" would have to be prepared to accept responsibility for you living in Spain .. I guess they would have to sign some document to that effect before you go to the Police station .
As an aside . There are horror stories of huge queues when going to the police station and that may be the case in the absolute centre of the city where many South American and East European immigrants will queue from practically dawn to get a place in the queue . I was dreading that prospect but I went to my more "local" police station in Calle Príncipe de Asturias and got the whole thing done in 15 minutes ! I'm pretty sure you can go to any police station .
Also bear in mind that whilst I did have an apartment I did not have a contract ... And the police did not ask for one . To be safe I took a few bills with me that showed my name and address at the top but they didn't ask for any real proof .
As you'll find out in Spain , the bureaucracy is stressful and you're never sure about exactly what is required when you go to these places . It may be worth going to the police station first and asking for the forms ( as I did ) and asking what documents they require from you ( including photographs ) . That way you can , at least , say that you had been told what was required of you . Many of the big police stations in the centre will have English speaking officers . Infact to become a policeman in Madrid does now require you to learn some English .
Whilst on the subject of bureaucracy I would make sure you have your European medical card . If you don´t have one then apply for it online but in Ireland ... Do NOT try and get it in Spain .. I , like you , am a European citizen .. but they flat refused to give me a card ( with no decent explanation ) .