In a high Andean valley guarded by soaring peaks, Peru's ancient Inca capital is 3,350m above sea level; the mountain air will render you breathless on arrival. According to legend, Cusco was founded in the 12th century by Manco Capac, following a challenge from his father, Inti the sun god, to locate "the navel of the world". The Incas envisioned Cusco in the shape of a puma, a symbol of spiritual power: at the head was the hilltop of Sacsayhuamán, with the river Tullumayo running down its spine; the main city centre was the body, with the tail located south of the centre, close to today's airport.
The Plaza de Armas has always been the city's hub. Today the square is surrounded by the renaissance legacy of the Spanish: opulent, baroque places of worship embellished with colonial arches. But the city preserves its narrow cobbled streets, now flanked by colourful handicraft shops and cafés, houses with railed balconies and walls made with vast Inca stones. Follow your nose uphill and you will be drawn towards San Blas, the eclectic artists' barrio.
Cusco has a better range of opulent accommodation than anywhere else in Peru. The Monasterio (00 51 84 24 1777; www.monasterio.orient-express.com), located on the tranquil Plazoleta Nazarenas, is currently unrivalled at the top end. A 16th-century monastery, with a wonderful courtyard, has big doubles from S/1,483 (£250), including breakfast.
What is claimed to be Cusco's first private boutique hotel, Inkaterra's La Casona in Casa Nazarenus (0800 458 7506; www.lacasona.info) is currently undergoing a "soft" opening. It should open officially in April or May. Across the plazoleta from Monasterio, it's set in a 16th-century Spanish mansion; 11 voluminous suites come with exquisite fireplaces, super-size bathrooms and private massage tables. Doubles from S/1,767 (£300) including breakfast.
For a quality four-star experience close to the main plaza, try the Picoaga Hotel at Santa Teresa 344 (00 51 84 25 2330; www.picoagahotel.com). The centrepiece of this 15th-century colonial mansion is a foyer courtyard framed by stone arches; the restaurant offers stunning views over the mountains. Doubles from S/458 (£80) including breakfast.
For an enchanting yet inexpensive option, try the cosy Madre Tierra hostel in San Blas (00 51 84 24 8452; www.hostalmadretierra.com) a hidden gem where you can cook your own meals and dine in a jungle conservatory. Doubles from S/115 (£19) including breakfast.
The Incas were the Romans of pre-Colombian America, and Cusco was their Rome, at the heart of their empire: Tawantinsuyo, "The Four Quarters of the Earth", which stretched from southern Colombia to southern Chile. It contained a pantheon of mummified rulers, the paramount temples of their nature gods and a hallowed central square for ceremonial worship.
But a motley band of Spanish conquistadors overcame the might of the Incas. In 1535 they looted Cusco's gold and silver, constructed churches and colonial houses over existing Inca buildings and founded a new capital at Lima. Yet in Cusco you can still walk in the footsteps of the Incas, and hear Quechua, their ancient language.
The most feted site, Qorikancha – the Inca temple of the sun – is located in the Plazoleta Santo Domingo; S/6 (£1); 8am-5pm Mon-Sat, 2-5pm Sun. It was mostly destroyed by the Spanish and rebuilt as the church and monastery of Santo Domingo. The original temple walls were lavished with gold and the mummified bodies of dead Incas were kept here, brought out for daily veneration in the sunlight. The temple was also an observatory from which to observe the astral world and its impact on the earth. The colonial church has been badly damaged in successive earthquakes while the underlying Inca walls remained rock-solid.
Another highlight is La Catedral on the Plaza de Armas with its domed bell towers which dominates the north-east side of the plaza. Built with pilfered stones from the nearby site of Sacsayhuamán, it sits astride the foundations of Inca Viracocha's palace and is one of the city's greatest repositories of colonial art, which includes the Last Supper depicting Jesus and his disciples dining on guinea-pig, a celebrated Peruvian delicacy. Admission is S/30 (£2.50).
The Museo Inka (00 51 84 23 7380), just east of the Plaza, is the best museum for showcasing Inca culture, containing a remarkable collection of gold, jewellery, mummies and much more. It opens 8am-5pm daily except Sunday (Saturdays from 9am-4pm), admission S/10 (£1.80).
For many of the other sites, you will need a Boleto Turistico. This ticket, price S/70 (£12.70), entitles you to visit many of the city's top attractions – plus several more in the Sacred Valley – for a flat rate, within a 10-day period. It is available from various sites, plus a bureau at the tourist office at Avenida Sol 103 (open 8am-6pm; 00 51 84 263 176). This is the ticket you need for the vast amphitheatre of Sacsayhuamá*, a temple of the sun where thousands gather every year to honour the winter solstice of Inti Raymi. The gargantuan granite walls guard the hilltop just north of Cusco, with panoramic views.
Andean restaurants offer dishes such as roasted cuy (guinea pig) and various locros (meat and vegetable stews). Cusco has a lively café scene: Trotamundos on Portal Comercio (00 51 84 239 590) overlooking the bustling Plaza de Armas is good for light bites and Jack's Café on Choquechaca (00 51 84 806 960) is a superb lunch venue serving up delicious veggie burgers and home-made soups. The best pubs are Cross Keys (traditional English) and Paddy Flaherty's (authentic Irish), both on the Plaza de Armas and Los Perros is a mellower bar option on Teqsicocha.
Clubbers can whirl the night away at Mama Africa (techno, rock and salsa) on the corner of Calle Triunfo and Santa Catalina.
The writer travelled as a guest of Cox & Kings (020-7873 5000; www.coxandkings.co.uk) and with Real Peru (0113 216 1440; www.therealperu.co.uk).Additional research by Simon Cole
Cusco is the gateway to one of the world's greatest walks, the Inca Trail. But that doesn't mean you should stay in the city before you embark on the three- or four-day hike. The starting point for the trail is down in the Sacred Valley, a bus or train ride from Cusco, and crucially at a more comfortable altitude. Some tour companies fly clients into Cusco from sea level at Lima, and make them spend the night there. But when you're about to do a long trek over high passes, the last thing you want is to start already suffering from the effects of altitude. I've seen too many walkers on the trail suffer from poor acclimatisation, particularly on some budget treks where corners have been cut.
The last time I did the Trail I had two grandmothers in their seventies with me. Properly acclimatised, they cruised past many a group of fit young trekkers who hadn't, and were collapsing on the wayside.
The smart move is, after arrival at Cusco airport, to spend your first night in the nearby Sacred Valley, close to the start of the Inca Trail. The fine dining and fleshpots of Cusco can be saved until you've finished the trail – when you will deserve them.
By Hugh Thomson
Five for food and drink
MAP Café at Plaza Nazarenas (00 51 84 242 476; www.map.org.pe) is a sophisticated modern restaurant encased in glass walls, with an outdoor terrace within the fabulous Museo de Arte Precolombino. Diners overlook a stunning colonial courtyard, flanked by pre-Inca artistry. After dinner, peruse the gallery, where indigenous artefacts are beautifully lit and mounted; dating from 1250BC to AD1352, they provide a rare insight into the artistic accomplishments of Peru's ancient cultures. The set menu costs S/106 (£19); the restaurant opens 11am-10pm daily.
Pachapapa on Plaza San Blas (00 51 84 241 318) is a popular Peruvian restaurant with the choice of a rustic indoor room or tables outside on the cobblestone courtyard warmed by outdoor heaters. Fried guinea pig is recommended only for starters, as portions are small. Book in advance, though, and you can request roasted guinea pig with huacay mint and peppers. Open 11.30am-10pm daily.
Cicciolina at Calle Triunfo (00 51 84 239 510; www.cicciolinacuzco.com serves organic Mediterranean cuisine in a warm, tastefully decorated venue with high ceilings and rich, varnished Peruvian furnishings. The presentation and service are excellent and mood music adds atmosphere as half a dozen chefs cook to an appreciative audience. Open 8am-11pm daily.
Fallen Angel at Plazoleta Nazarenas (00 51 84 258 184; www.fallenangelincusco.com) provides an intriguing twist to the religious symbolism of the city's churches. Cherub-winged pigs hang from the ceiling of this kitsch, low-lit lounge where a throwback "New Romantic" crowd kick back, to a seamless twin turntable mix of chill out grooves. Avant-garde art festoons the walls of this gay-friendly venue. Presentation is everything when it comes to food, lamb with rose petals is a must. Open 6pm-late daily.
Paddy Flaherty's, on the southern side of the Plaza de Armas (00 51 84 247 719), has been providing decent Guinness to the high-altitude city for over a decade. This welcoming venue is filled with Irish artefacts and artwork, and a toy train runs around a track circumnavigating the pub overhead. The comfort food is excellent, from pizzas to shepherd's pie. Open 11am-2am daily.
Five best budget hideaways
Hobo Hideout, Iquitos
Jimmy Walker was asleep when I arrived – not unreasonably, because a diverted flight meant that it was the middle of the night. But the genial American proprietor of the most characterful lodging on the Amazon let me in and led me through a labyrinth of stairs, spirals and steps to what, by any measure, looks and feels like a treehouse. For S/40 (£7.50), you don't get breakfast but you do get a large room in the sky where fresh air breezes through the shutters, bearing with it the chime of bells from the main square, just a couple of blocks away.
Hobo Hideout, Calle Putamayo 437, Iquitos (00 51 65 234 099)
Hostal VylenA, Puno
At the other end of Peru, the atmosphere is cool and thin, which gives the "capital" of Lake Titicaca the air of a mountain fiefdom. Tucked away in the quiet streets to the south of the cathedral, the Hostal Vylena slips easily into the Alpine genre, with elaborate murals and plenty of dark wood. Rooms are generously sized and furnished for S/65 (£11) double, with an excellent breakfast a further S/5 (£0.90). The off-piste location is the other good aspect: the excellent bars and restaurants are five minutes' walk away, but noise is never a problem at the Vylena.
Hotel Vylena, Jiron Ayacucho 505, Puno (00 51 51 351 292)
Hostal El Balcón, Cusco
As Will Gethin's article (right) shows, Cusco is better appointed than anywhere else in Peru for top-class and imaginative hotels. Here, though, is a hideaway that is as reasonably priced (US $54/£27 double, including a breakfast fit for an Inca emperor) as it is effortlessly elegant. A mansion halfway up a hill behind the Plaza de Armas has been converted into a community of comfortable and tastefully furnished rooms, each facing out into a courtyard strewn with flowers – and enjoying a rooftop view of the city that justifies the hostal's name. Get here soon, before travellers' talk helps it blossom into an upmarket boutique hotel.
Hostal El Balcón, Calle Tambo de Montero 222, Cusco (00 51 84 236 738)
El Albergue, Ollantaytambo
"All stations to Machu Picchu" – if the train you are on makes this promise, then you will be very close indeed to El Albergue. That is because the Twenties station hotel on the platform at Ollantaytambo was taken over and transformed by North American adventurers Wendy Weeks and Robert Randall into a dream destination. Their son, Joaquin Randall Weeks, now runs the "Bed & Breakfast" as it is modestly titled. Hidden away beyond the station facade you find a garden of earthy delights together with attractive cabañas. The rates of $48 (£26) single or double include breakfast and as much coca tea as you can swig; other meals can be taken in the town itself, or on request at El Albergue.
El Albergue, Ollantaytambo (00 51 84 204 014; www.elalbergue.com).
Hostal Gémina, Lima
There is nothing like an enthusiastic recommendation from a fellow traveller, and the Austrian in Puno had no doubt: when in Lima, stay in this fabulous property in the trendy and safe Barranco area of the city. The ocean is five minutes' walk away, he promised, but he failed to mention the warm welcome, great breakfast (included in the current US$35/£17 special), intriguing artefacts such as antique telephones, and the superb location which is close to all the wining, dining and dancing action. Central Lima is a half-hour bus ride away; Miraflores, the Manhattan of the capital, just 10 minutes. Within three minutes' walk of the front door is the best choice of cafes, restaurants and clubs in all Peru.
Hostal Gémina, Avenida Grau 620, Barranco, Lima (00 51 14 770 712)
By Simon Calder