I'd also look into BA Avios redemption and Aeroplan
They don't have many options, but sometimes they do work out

e.g. I booked 2 nights in Florence (early April 2014), very close to the Duomo during their 50% sale (lucky me)

Hotel Laurus al Duomo Firenze
Via de' Cerretani, 54/R - 50123 Firenze - Italia
Tel. +39 055 2381752 - Fax +39 055 268308
http://www.florencehotellaurusalduom...orence-address

Originally 46700 Avios for 2 nights --> 50% off = 23850 Avios

I looked into the SPG options too, but they're too far from the city core (relatively)