We stayed at the Principe Pio hotel during the last leg of our honeymoon. The room itself was adequate, nothing fancy, you basically get what you pay for. We chose it because the price seemed reasonable and it seemed like a good location. My biggest complaint was that the "non-smoking" room smelled overwhelmingly like a "smoking" room. We had to sleep with our windows open every night but, since we faced the street, we were treated to noxious fumes from the passing buses. That being said, the location was perfect. It is right next to the Palace and it is close to all the sights. It is also nicely situated between two metro stops, which makes getting around easy, particularly to the Prado. Overall, the hotel was functional and the staff was pleasant. It met our basic need (a place to sleep) but did nothing to surpass our expectations. Another reviewer mentioned that they had since begun renovation. I'd be willing to give the place a try again (if the room rates stay about the same) to see if the hotel has improved.
This review is the subjective opinion of a TripAdvisor member and not of TripAdvisor LLC