Newly renovated hotel in the middle of the old town - beautiful old courtyard and rooms. Not cheap, but costs less and is much nicer than something like the Nacional - and a good option if you need to book a hotel for the first few nights for visa reasons. Staff are a bit Fawlty Towers but it's quite atmospheric and comfortable. Big cigar shop, and peacocks, for some reason.
Calle Mercaderes, Habana Vieja.