Almost everyone who travels to Peru also visits Cuzco, invariably on their way to Machu Picchu. Cuzco is the ancient Inca capital that was founded in 1100 AD. It is well worthy of at least two full days to explore the fascinating city, which is covered it meticulously carved Inca Walls. It has developed into one of South America's most visited cities - you're very much on Peru's "Gringo Trail" here. There are numerous museums, colonial churches, monasteries, convents and pre-Columbian ruins to discover both in the city and the surrounding Sacred Valley. You'll need to purchase a "Cuzco Tourist Ticket" which allows you entrance to dozens of sites of interest in Cuzco and the Sacred Valley.
Luxury Cuzco Hotels
Cuzco is rammed full of hotels. While many are cheap backpacker hotels, there's plenty of luxury options in addition (Peru is one of South America's top luxury travel destinations). The best luxury hotel in Cuzco is the Monasterio Hotel which is by far the most famous in town. The Monasterio is an old converted monastery, ozzing in charm and character. This luxury hotel gets so booked up, if there's no space consider the 5 star more modern Libertador hotel, or take a step down in price to the 4 star Novotel or Casa Andina Private Collection which are both excellent value.
Sacred Valley of the Incas & Luxury Hotels
Aguas Calientes is the access point for Machu Picchu tours, and to get to Aguas Calientes you must travel from Cuzco through the valley of the Incas to Ollantaytambo, from where you catch the train onwards. This slow train also departs from Cuzco, but to avoid a crack of dawn start, it's best to spend a night (or three) in the Sacred Valley of the Incas, and leisurely travel onwards to Ollantaybambo to pick up the train the following morning. By not visiting the Sacred valley, you're missing out on one of Peru's most interesting and beautiful regions. By visiting on a day tour from Cuzco, and returning to Cuzco for the night, before travelling onwards to Machu Picchu, you're doubling back on yourself, and wasting time. Our travel advice would be to book a hotel in Peru's Sacred valley - there's various options. Personally I would always recommend, to everyone, that Ollantaytambo is the best village to spend a night or two in.
Pisac is just outside of Cuzco (30km) - there's a fascinting Sunday market, in addition to an amazing Inca Fortress overlooking the small town. The luxury hacienda the Royal Inca Pisac is a good hotel option if you want to overnight in Pisac. Chinchero and Moray are two other small towns well worthy of a visit in the Sacred Valley - both are ozzing with Incan culture and history, and it's common to take a day tour from Cuzco to visit. Remember it's best to travel onwards - no point in heading back to Cuzco - head for Ollantaytambo, Urubamba or Yucay and find a hotel in either (en route to Peru's legendary Machu Picchu).
Urumbamba has a wonderful setting with snow capped Andean mountains in the distance, and a fascinating market. Luxury hotels in Urubamba include the Casa Andina Private Collection Sacred Valley, which has numerous adventure travel options for those wanting to stay longer than a night, the colonial Libertador Valle Sagrado Lodge or the excellent Sol y Luna Hotel, which offers private bungalows, mountain biking, trekking and horseback riding.
The nearby town of Yucay is an alternative place to overnight, and a great place to relax for a few nights. Peru has no decent beach resorts - the Sacred valley is the logical place to wind down on your vacation to Peru. Luxury hotels in Yucay include the Inkaterra Urubamba Villas (which offers villa rental complete with a cook if you ask) or the converted monastery of Sonesta Posadas del Inca. There's lots of outdoor adventure activites such as rafting and horseback riding that can be arranged by both.
By far the most scenic and peaceful village in which to stay in in the Sacred Valley is Ollantaytambo. It's a beautifully set village full of ancient old Inca walls and with some splendid Inca ruins in the hills either side of the village. The train to Machu Picchu passes through town, meaning you avoid the very early start from Cuzco. Pakaritampu Hotel is just a few minutes from the train station, or consider the more upmarket Nustayoc Mountain Lodge and resort which is just outside of town. There's over a dozen hotels in Ollantaytambo to choose from in total - it's a lovely village worth at least a night.