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Stay at a B & B near the Plaza. Park your car and do not start it until you leave. Bring good walking shoes and enjoy. We are in Santa Fe every year and we stay at the same B & B and walk from after a hearty breakfast until time to go to bed. That is what we do. First year we took a cheap hotel outside of the Plaza area and drove in and park. Not a problem except we didn't get to really enjoy the historic Santa Fe area. Now we pay the higher price and I can't get enough of that area.
I agree with Debbie and Bongo - there are many cool B&Bs, many with private casitas within walking distance to the historic plaza, which is the core of the city. As for hotels (not B&Bs) in that area, there are several to choose from; The Inn at the Anazazi, Inn on the Alameda and the Old Santa Fe Inn are three excellent choices. For larger hotels you can try the Inn at Loretto, LaFonda, the Eldorado Hotel and the Hotel St. Francis. There's also a Hilton just a couple of blocks off the plaza.
In short, lots of choices! The difficulty might be in finding availability during Christmas - New Years.
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