Perhaps due to its combination of historic wealth and comparatively recent appearance on the tourist circuit, accommodation in Bilbao is both scarcer and more expensive than in any other major city city in Spain. In a month traveling throughout the country, I paid more for a single room at Pension Bilbao (€37.60) than anywhere else. As it was among the best located and nicest hostales (a unique Spanish combination between a budget hotel and hostel) in which I stayed I feel the price was merited, but I mention this fact to emphasize just how expensive a city Bilbao can be. As this is the closest thing Bilbao has to a budget hotel (and a very nice one at that), I recommend booking as far ahead as possible!
Location: It’s almost impossible to find a better-located place to stay than Pension Bilbao. It is located 50 meters from Estación de Abando (which also contains the Abando Metro Station), you only have to cross a single street to reach it. The casco viejo is only about 300 meters away across the Puente de Arenal. The Guggenheim Museum is a little over twenty minutes away on foot, or you can reach it by tram (from outside Estación de Abando). San Mamés and the Termibús Station are half an hour away on foot and are accessible by the aforementioned tram and Metro. Consequently, I found the location perfect, but I’ve included this exhaustive information in case you’re particularly interested in staying near an individual attraction, in which case you may wish to look elsewhere. Although Pension Bilbao is on the fourth floor, there is a fairly rapid elevator in the building.
Rooms: My single room (which had a double bed) was quite spacious, bright, and attractive. The solid-oak wardrobe was quite sizeable, and a desk was provided as well. The room had its own balcony, although with Bilbao’s generally poor weather (I visited in late April) I was not able to take much advantage of it. The bathroom was reasonably spacious, and shampoo, soap, and towels were provided daily. The room’s television set received only Spanish television (which enabled me to, among other things, watch a football match with commentary in Basque.)
Service:Although I had some initial difficulties communicating by phone and email (which may have been my own fault), I found the service as the pension itself: impeccable. Aitor Alonso, the proprietor, speaks excellent English and gave me better information on Bilbao than the tourist office itself. My room was cleaned and the towels were changed daily. Mr. Alonso (and his staff) live upstairs – while they are generally not present, you can reach them at any time via a buzzer in small common area. I found the staff particularly friendly. Pension Bilbao accepts credit cards and requires a credit card number (though not a deposit) to hold reservations.
Quite simply, it's the best budget accommodation option in Bilbao.
Rates and further information: http://www.pensionbilbao.com.