I stayed in the Hotel Intur Palcio San Martin last year. It is located in the center of Madrid next to the Convento de las Descalzas Reales, in the Plaza de San Martín, a few meters from the Plaza Mayor, Palacio Real and the Teatro de la Opera and Puerta del Sol.
You could also check out the following 2 sites
. This has great deals for bookings within 21 days of departure.
. This site has great reviews for hotels and cities all over the world, so if you find a hotel, you could check out what other people have thought of their stay.