One of the best places we stayed in Spain was a hostel called Albergue Aterpetxea. It's located about 10 minutes out of town on a hill and is easily accessible by local bus number 58. The buses go every 15 minutes from the centre of town.
This hostel was the first in Europe (and second in the world) to be awarded the ISO 9000 Quality Assurance Award in 1999. In my opinion all European hostels should be striving to getting at least half way to this goal as there are heaps of dodgy places on the map. I tell you this place is impeccable. Upon entering the place it appears a bit like a hospital when you go to check in. As well as reception on the ground floor there is also a laundry (essential for summer in Spain when backpacking ~ especially from the Running of the Bulls festival in Pamps) and telephones. Up on the first floor there is a communal dining hall, TV, and Internet access. The second floor is specifically designed for handicapped people and the remaining 5 floors are the other bedrooms/dorms.
The staff here is very friendly and helpful. The dorm rooms were spotless and had a view out over part of the city and the river. Breakfast is included in the price and was even prepared for us to take in advance when our cab to the airport left before the kitchen was open. The place is open from 7am until midnight and then the security bloke opens the door on the hour every hour until 4am and if you're not back by then well its bad luck. Check out time is 9.30am and if you sleep past this then you have to pay for the next night’s fee. All up there are about 140 beds in rooms ranging from singles to dorms sleeping six. Prices are very competitive and vary depending on high and low seasons and also if you are under or over 25 years old. Our dorm room for four costs about 16 euros.
The best way to get around while staying here is to get the bus which leaves from just out the front. There is an airport bus that leaves from town or alternatively ~ if the bus driver is still asleep ~ a cab to the airport is 24 euros.
Click on this link to have a look at the virtual tour ~ Hostel Home Page
E-mail: aterpe@albergue.bilbao.net