Granada is one of Nicaragua's oldest cities, and it's full of Spanish Colonial charm -- expect historic churches, a large central plaza, and lively festivals throughout the year. It's also located right on the massive Lake Nicaragua, and visitors will find restaurants and bars along the waterfront as well as a pier where ferries depart to Ometepe, an island with two volcanic peaks. Nicaragua is still a poor country and it shows, but as tourism grows here, the city should see more development.
Granada is a small city, but staying close to Central Park and Calle La Caldaza will put you in the heart of the action in town. Those more interested in views than sights may consider staying in one of the hotels along the lake.