I went with friends for New Year's Eve and we got a good deal, so it was worth it.
The hotel is located on the main Avenue in Punta del Este (Gorlero), so you can either consider it very well located, because it's close to everything, or on a terrible location, once it's a VERY busy area.
I'd say it depends what you're looking for.
If you come by car, it might be an issue. The hotel doesn't provide parking, so prepare to spend a lot of time looking for a parking space - it's almost impossible to get a spot in hight season. If you do not have a car, I'd say it's a good choice. You'll be able to do almost everything (note: in Peninsula) within walking distance. I just have to point out there's a square really close to the hotel with a craft fair that gets crowds of teenagers, which can be annoying, since they're loud and sometimes drunk.
The pool is nice and breakfast is good. The rooms are ok. The entrance it's quite nice, considering it's an old hotel. But don't expect anything fancy - it's far from that.
Overall, if you are prepared for all that and doesn't want to spend much in a hotel, I'd say go for it.