A couple of other recommendations for hotels... In Granada we stayed at the Alhambra Palace Hotel and had an awesome corner room with a balcony with views of the city and the Alhambra. If nothing else, have a drink there at the bar...sit on the terrace.

We stayed at a Tryp in Madrid as well, I think it was the Reina Victoria or something like that. Nice place and also within walking distance of the Plaza Mayor.