I like staying around Susukino area in Sapporo, but a little bit away from all the noisy bars etc. In Otaru, somewhere near the main touristy walking street / the canal or the main train station (doesn't matter that much as Otaru is small).

If you're uncomfortable driving in snow, then might be a good idea to avoid renting a car. Even in Sapporo city centre, some of the minor roads were very badly cleared (in particular the one my AirBnB was on) - although the winter tyres on my car did a fantastic job!

I think Dormy Inn is a solid choice among the Japanese chains, not just in Otaru and Sapporo, but everywhere in Japan. Last time in Otaru I stayed at Torifito Otaru Canal, which was good.