We stayed at Hilton Garden Key West, reasonable rates, they have guest parking there but it is 15.00 a day.. we drove our vehicle all over the island, you do have to pay for parking everywhere. But also the hotel does have shuttle service to down town to all the shops etc. You can also rent scooters, or electric small vehicles but have still pay to park.. We also did the sunset sail and it was absolutely wonderful also!
Yes, there are lots of places to stay, depends on your budget. There are few hotels close to Smathers, one of them is Barbary Beach House (former Sheraton) which is nice and it's right across from the beach. Depends if you want to stay in overcrowded expensive downtown but have an easy walk to most of the attractions or in a bit quieter new town but with some ubering or biking to do to get to downtown. If you're bringing a car down, try keeping it parked at your hotel and rent bike or scooter (if you're brave) to get around. Parking is extremely challenging and pretty expensive downtown. And last but not least - have a great time!
I stayed at NYAH for $250 a night pretty cheap and within walking distance of everything. Off sight parking is $10 a night a couple blocks away.
There are many hotels on key west island. So you can stay there. Also, you can stay in Miami and travel to key west.
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