If you're not bothered about proximity to Cau May Street, then a hotel overlooking the lake is a good option.
Check rates at Sapa Lake View Hotel on Agoda.com
It's peaceful, except for the Sapa minibuses, convenient for the multitude of dining options along Xuan Vien Street and the lake view doesn't get shrouded with mist like the valley and mountain views from Cau May and Fansipan. Sapa Lake View is a newly opened hotel along Ngu Chi Son Street. We arrived at lunchtime to check it out, and the smell of cooking – it smelt like liver -- was a bit intrusive in reception, but it's worth pushing on as the rooms are excellent value. Take a room at the front, which will be 100,000 VND more expensive but come with lake views through large windows (though no balcony). The views are the main reason for staying in the area, so why stare at a back wall? It remains to be seen if the hotel retains its quality as it ages, but for the time being the rooms are very smart: new furniture, big beds, desks, benches and TVs with cable. The beds are a bit hard but topped with very fluffy duvets, so you can always sleep on top of them in the summer. Bathrooms are smartly tiled with rainshowers, although are still wet rooms. Price includes breakfast, which you can take on the terrace out front.
Type of room, low and high season prices
Room: Standard double room, low season: 400,000 dong, high season 400,000 dong. Notes: No view
Room: Superior double room, low season: 500,000 dong, high season 500,000 dong. Notes: With view