This idyllic hotel in Peguche (about 10 minutes from Otavalo) is owned by La Casa Sol in Quito. It is a beautiful adobe structure with multiple levels of interesting rooms overlooking the Otavalo valley. The price of accommodation includes dinner & breakfast...both very good.
The staff are very friendly & speak a fair amount of English.
Try and time your stay to include the Saturday market in Otavalo....a must see. Also good hiking in the area.
A beautiful, relaxing location for a quiet getaway from the bustle of Quito.