I don't know the hotel but I looked at its location and its way up a very steep hill, so unless you're planning on taking taxis (big CHFs, but then you're looking at a 500CHF/night hotel) everywhere I wouldn't stay there with kids.

Pick somewhere on the lakefront and closer to the center of town.

As for skipping Lugano altogether, it really depends on your itinerary and what you're looking for.

EDIT: I see you're looking at the end of February: the only view you might get from that hotel is thick fog over the lake.