If you want to avoid chain-run hotels and support a Palestinian family owned business, this is a great place to go - it's a 19th century Arabic mansion, that has been owned and run by the same family since 1960.
The Jerusalem Hotel is extremely well located for visiting the Old City, just a 5 minute walk from Damascus Gate. You enter via a lovely garden terrace and bar, which serves decent local food and into the atmospheric, traditional style hotel. Rooms vary in size, some have lovely small balconies, but all have rustic charm and mine, although not large, had a great shower! Free wifi throughout the hotel.
The staff could not be more friendly and helpful.