First off, this hotel is not called Gran Via, although it is located at the midpoint of this central boulevard. It is called the Petite Palace Italia. The location is terrific -- central to all the walking (or cycling -- see Bravo Bikes) that you would want.
Getting a hotel room in Europe for three or four people can be a challenge. Often you end up paying for two rooms. High Tech Hotels has a chain of moderately priced, well-located hotels in central Madrid. We enjoyed a two night stay in this one. Check the hotel website to see photos of how they accomodate families (answer: fold down bunk beds for kids -- space efficient and very comfortable). Firm beds, large bathrooms, showers with more nozzles than you will ever need. Not huge or terribly fancy, but just fine.
"High tech" means that wi-fi is free, although a javascript error in the service they used meant that Apple MBPs or iPads would not connect without turning off javascript. Also like most Spanish hotels, they offer ethernet connections, so carry a cable.
The hotel offers breakfast for 7.50 euros. It is pretty sick -- I'd pass on it. You can eat twice as well for half as much at The and Cafe, 100m away.
Staff were outstanding. They helped us to manage lost luggage and find restaurants. Bilingual with great service ethic.
I would not hesitate to bring small kids here. If you want to avoid the red light district, keep away from Plaza Gran Via, 200m away. You are a short walk from about five different barrios -- the neighborhoods that make Madrid special. Gran Via itself is a huge boulevard carved through central Madrid a century ago and is, for my money, mostly forgettable.
This review is the subjective opinion of a TripAdvisor member and not of TripAdvisor LLC