Though it may look remote on the map, Hostal Chancerel (Decher 400, tel./fax 065/234221, www.turismochancerel.com [1], US$31/52 s/d) is still less than 15 minutes’ walk from the Plaza de Armas. Rates include spacious rooms with private bath, breakfast, cable TV, and central heating. Other meals and German-style onces are available.
One of Varas’s most distinctive accommodations, its natural wood walls enhanced with work by regional artists, the boutique-style Hotel El Greco (Mirador 134, tel. 065/233880, fax 065/233388, www.hotelelgreco.cl [2], US$55/60 s/d) is a recycled German-style building with a dozen impeccable, moderately sized rooms.
Its exterior restored to its pioneer style, 
The Guest House (O’Higgins 608, tel. 065/231521, www.vickijohnson.com/guesthouse [3], US$72/83 s/d) occupies the German-colonial Casa Wetzel, a national monument. With smartly furnished rooms and ample, well-lighted common spaces, it’s Varas’s most intimate accommodations.
Directly on the Costanera, Hotel Licarayén (San José 114, tel. 065/232305, fax 065/232955, www.hotelicarayen.cl [4], US$60/78–75/90 s/d) hasn’t quite kept up with competitors in its price range but does offer amenities such as a sauna and gym.
On the lakeshore just south of the casino, the 38-room Hotel Bellavista (Vicente Pérez Rosales 60, tel. 065/232011, fax 065/232013, www.hotelbellavista.cl [5], US$80/96 s/d) has outstanding lake views but fewer amenities than some other places in its category. It’s substantially cheaper off-season.
Links:
[1] http://www.turismochancerel.com
[2] http://www.hotelelgreco.cl
[3] http://www.vickijohnson.com/guesthouse
[4] http://www.hotelicarayen.cl
[5] http://www.hotelbellavista.cl