I must say the location is wonderful (and easy to find if your group members tend to get lost, since they can just ask people where the iconic waterwheels are). The location is the only thing saving it from a "Terrible" rating by me.
Rooms: Filthy. I never let my bare skin touch the floors or carpets. Yuck. They weren't even cleaned well (on top of being ancient and permanently filthy) - there were things still out in the middle of the carpet (like a toothpick). I did talk directly to the housekeeper after the first night, and she did as best a job as she could do with the ancient carpets they have. The bathrooms were also moldy and permanently dirty. Others in the group had large chunks of hair sitting around in theirs. They smelled stale and smoky, as did the whole hotel. The towels and linens were "clean enough." I wasn't afraid to touch those, so we stayed, but they were worn and grey.
General atmosphere: Old, ancient, smoky, and filthy. I've only been in a couple of hostels and hotel that are worse.
Service: Fairly abysmal. They front desk was massively confused by my passport, asked questions, then still called later to get information on it (they had written down one of my cancelled Chinese Visa numbers, not my current one). Things were constantly running out at breakfast, or not turned on. It was hit or miss if they would actually get more when asked about it.
Breakfast: There were some OK parts - when fresh, the coffee was good. When on, the toast machine worked on the non-stale bread. There was some fresh fruit (some that needed checking first). There were pancakes and syrup (although they were lukewarm and ran out). There weren't always smokers nearby.
Location: Wonderful, as I said at the top of the review. Easy to access and find, BUT that location is NOISY!!! If you have rooms facing the front, you'd better have earplugs. The bars nearby BLAST their mostly-off-key singers so loud you can hear the whole show(s) from your room. If you are on the back side, you might survive without earplugs, but you can still 'enjoy' the show(s).
There are MANY hotels throughout the old city. There is no reason to be in this one unless you are forced to be. In fact, I was seriously considering paying to stay in a different one despite this one being included on the tour. As it was, I spent every moment I could outside the hotel, so put up with it for the second night. Do yourself a favor and find some quaint, quieter place down one of the cobbled lanes. The bumpy route you have to drag your suitcase across will be worth it.