The Rocks and Circular Quay are convenient for a first visit: you can walk to the harbour icons and board trains or ferries nearby. They can also carry a premium. If you value access more than the view from your room, compare hotels around Wynyard, Town Hall or Central before paying for a waterfront address.
For a stay built around cafes and dinner, Surry Hills near Central is a strong alternative; Newtown gives you a different inner-city food scene with a short train ride into the centre. Check the actual walk from the room to a station, the last leg after dinner, and the total price. A cheap room that adds a long transfer every day is rarely a saving.
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