After browsing the Internet for days, settled on Merchant Marco due to its location and a special deal. The hotel is indeed well positioned, 5 minutes walk from the lake. Don't be fooled into thinking you can walk to it from the railway station easily. I gave up after walking for 70 minutes and got a taxi. The staff spoke good English and were very helpful. They did try to charge me a deposit on arrival which was 50% more than the full price of my stay, but a sharp refusal solved that small issue. The room was large and clean, and the bed comfortable. If I was going back to Hangzhou, I would stay away from the city, further around the lake, as the city is VERY busy with both people and traffic and the part of the lake nearby is commercialised. Having said that, I paid 918RMB for 2 nights, and the hotel rate on arrival was around 1300RMB per night, so a good deal was had.
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