The most popular digs in Gracias [1] are at Hotel Guancascos (tel. 504/656-1219, www.guancascos.com [2], US$25 s, US$32 d), three blocks west and one block south of the parque central, offering 17 rooms tastefully built in a rustic style, with hot water, cable TV, fan, and a large window. Banana trees and other plants grow around the grounds. Rooms 7, 8, and 9, under the restaurant, have beautiful views. The restaurant is a good place to meet other travelers in Gracias and to gather tourist information, and it has a computer with free Internet access for hotel guests to use. Guancascos also rents sleeping bags (US$2) and tents (US$5–10), and can arrange outings on horseback.
A fantastic addition to Gracias’s hotel scene is 
Finca El Capitán (tel. 504/656-1659, www.hotelfincaelcapitan.galeon.com [3], hotelfincaelcapitan [at] yahoo [dot] com, US$16 s, US$32 d, a few dollars more for a/c), facing the Santa Lucía church [4] on the outskirts of town (on the road that leads to Celaque [5]). The 20 rooms are spaced through 12 cabins painted in rose, peach, and teal, encircling a large common area with grass and banana trees, a swimming pool, and children’s play area. Beds have colonial-style dark-wood headboards, and the cabin porches have hammocks and rocking chairs in which to while away an afternoon. There is a full-service restaurant (breakfast US$2–3, dinner US$4–5), decorated with hollow gourds and animal hides.
The swankiest place in town is Posada de Don Juan (tel. 504/656-1020, www.posadadedonjuanhotel.com [6]), with luxury linens and flat-screen TVs, as well as a restaurant, swimming pool, parking, and wireless Internet access. The best rooms are around the pool; the others encircle the parking lot motel-style, jarring with the otherwise decidedly-upscale ambience. Singles are US$24–52 and doubles US$34–58, depending on if the room has a fan or air-conditioning, and whether the beds are full-size or queens. There are also rooms available with three double beds (US$46–79).
The much simpler Aparthotel Patricia (tel. 504/656-1281, US$32 s/d) is another acceptable option, with five spacious rooms with tiled bathrooms and cable TV. The hotel has one very large apartment for US$53, with two bedrooms and a full kitchen. The furnishings are nothing special, but if space is what you need, Patricia’s got it.
By the Presidente thermal baths is Villas del Agua Caliente (tel. 504/656-1172, villasdelaguacalientehotel [at] hotmail [dot] com, US$32 s/d), with 16 rooms in three cabins, plus a restaurant. The cabins have ochre stucco walls and exposed beams, as well as a fan and TV; some rooms can accommodate up to six. The pools are fun to visit at night, and after a few hours in the pools, with a couple of beers, having a bed nearby is not such a bad idea.
Outside of town is the group-friendly Villa de Ada (tel. 504/656-0763, www.villadeada.com [7], US$25 s, US$27 d), with square cabins set near lagoons. There are swimming pools for adults and children, and it’s possible to take a boat ride or fish in the lagoon (the restaurant is known for its fried tilapia).
Links:
[1] http://www.moon.com/destinations/honduras/western-honduras/gracias-and-the-lenca-highlands/gracias
[2] http://www.guancascos.com
[3] http://www.hotelfincaelcapitan.galeon.com
[4] http://www.moon.com/destinations/honduras/western-honduras/gracias-and-the-lenca-highlands/gracias/sights/churches
[5] http://www.moon.com/destinations/honduras/western-honduras/gracias-and-the-lenca-highlands/parque-nacional-celaque
[6] http://www.posadadedonjuanhotel.com
[7] http://www.villadeada.com