Until relatively recently, Barcelona had the contemporary edge on the more regal and traditional Madrid. But the Spanish capital has now embraced a number of hip new hotels (such as the Puerta América and Urban Hotel), trendy boutiques and restaurants that are more Javier Bardem than King Juan Carlos.

Hospes Madrid is one of the latest examples of the city embracing all things modern. Opened just over a year ago, it is part of an innovative boutique hotel chain that has been quietly making a name for itself in its native Spain and elsewhere. The hotel epitomises Hospes' signature super-stylish blend of the old fused with the new.

The old in this case is an elegant five-storey mansion with ornate balconies sitting on the Plaza Independencia, one of the hubs of historic Madrid. The Plaza's main focal point is the city's answer to the Arc de Triomphe, the Alcalá Gate, built in 1778 during the reign of Bourbon King Charles III.

The building, which was constructed in 1883, was commissioned by the widow of former Spanish Prime Minister, Colonel Prim. Designed by architect José María de Aguilar, it once housed several different apartments built for the burgeoning Spanish bourgeoisie. Despite the modish makeover, there is still an intimate and welcoming feel to this new incarnation.

Once inside the soaring entrance courtyard, which was originally used to park carriages but now serves as the reception, you are enveloped in a tasteful world of green, champagne and metallic hues. The rest of the decor has a spare but appealing quality, with some extravagant touches. At the same time the beauty and grandeur of the original structure, with its high ceilings and ornate stuccowork, is allowed to shine through.

The front desk sized up my needs immediately and handed me a map of the chi-chi Salamanca neighbourhood, which is dotted with upmarket boutiques and prowled by immaculately coiffed Madrileños. This corner of genteel Madrid doesn't feel cursed by crowds of tourists, although you might feel out of place without a designer jacket and Loewe handbag.

Shopping aside, Hospes Madrid is well placed for anyone keen to explore the city's celebrated museums and galleries. The highlight of these is the Holy Trinity of El Prado, Museo Thyssen-Bornemisza and the Museo Reina Sofia, all set along the gracious Paseo del Prado.

This rich cultural seam is also home to another impressive symbol of modern Madrid, the CaixaForum, a former power station that has been given a Tate Modern-style makeover by architects Herzog & de Meuron.

The hotel's bars and restaurants are clearly aimed to attract a steady stream of Madrid's glossy posse. The Senzone Restaurant, serving new-wave Spanish cuisine, is also garnering quite a reputation. Expect the likes of lamb shoulder with chick peas and a date purée. There is also a stunning oak-panelled lounge bar, a tapas bar and an impressive internal courtyard that serves as an open-air bar on Madrid's sultry summer evenings.

Location

Hospes Madrid, Plaza de la Independencia 3, 28001 Madrid, Spain (00 34 91 432 2911; hospes.com). In the heart of historic Madrid, the hotel overlooks the Plaza de la Independencia and the Alcalá Gate with the verdant Retiro Park stretching out beyond.

Time to international airport: Madrid's Barajas airport is a 20-minute drive away.

Comfortable?

There are 41 rooms divided into seven different categories. Our duplex suite on the upper floors of the hotel was spread over two levels and had a bird's eye view of both the Alcalá Gate and leafy Retiro Park. Decor was luminous, with dark grey accents. Our pretty, light-filled attic bedroom – reached by a flight of stairs – had exposed wooden beams and continued the theme of restful, shimmering hues. The bathroom was luxuriously decked out in the usual white marble.

Freebies: Toiletries by cult Greek beauty brand Korres, as well as handy amenity kits containing most necessities for an overnight stay. Guests also have the use of stylish retro bicycles for leisurely rides around Retiro Park.

Keeping in touch: All the rooms are equipped with the latest technological gadgetry – our room had not one, but two flat-screen TVs (which felt a little excessive). There are complimentary newspapers and direct-dial phones. Wi-Fi is free.

The Bottom Line

Doubles start at €230 a night, room only.

I'm not paying that: The Petit Palace Art Gallery (00 34 91 435 5411; hthoteles.com) nearby has doubles from €120, room only.