In my opinion, the best urban area for tourists to stay in Chiang Mai is Nimman. I think that the best hotel there is the
U Nimman Chiang Mai .
The old part of the city (where the InterContinental, Marriott & Melia are located) is pretty depressed and might stay this way until the AWC projects (which include Lannatique) are completed.
Bangkok Post: AWC lays out expansion projects for Chiang Mai