I booked this hostel for some friends of mine as they were coming to visit me,my son and myself had a terrible experience with the owner when we tried to book them in,a very unplesent man,i dont think he was spanish we have used a number of hostels in Nerja but will not be using this one again.

Two of us girls stayed in this lovely little hotel, and we had an incredible time. It's a 10 second walk from where the bus drops you off in Nerja, so it couldn't be more convenient for bus travelers, and there are supermarkets nearby. The ocean is about a 10-15 minute walk away, and is absolutely gorgeous and welcoming.
Breakfast at the hotel is toast with jam/nutella/butter, good thick coffee with heated milk, and different teas. Nothing fancy, but it does the trick. Cute little breakfast area.
Also, the owners will provide beach towels if you ask!

In this price range, this place is PERFECT!

Good, Clean rooms. Bathroom enormous and clean. Breakfast was basic but very welcome. At this price you cannot expect the Ritz! Great Stay.

Just returned from staying 9 nights at Hostal Azahara in Nerja.Must say this place was clean and basic with one or two nice touches.We had a room overlooking the bus station and, consequently,main road into Nerja.Unfortunately,traffic noise was pretty well relentless,right into the early hours of the morning.Other guests,however,who didn't have a balcony like us or window facing onto the street,didn't suffer such problems.Noise from early morning buses and those typical Spanish mopeds was particularly grating!
Our room was large and comfortable.Towels were changed daily,including bath towels and the room was spotless.Great to have a fridge in the room,very handy for a nice cool beer or glass of wine after a day in the baking sun.The bathroom was again,large and clean.However,the bath was so small it could only be classed as a shower only,which wasn't a problem for me personally.
Good to have use of the internet during our stay.
Breakfast was basic,bread rolls,toast,croissants,and coffee/tea was available for free virtually for most of the daylight hours.No meats or cheeses to accompany rolls though.
The hostal is located in a good situation,5-10 minute walk into main restaurant area and Balcon D'Europe and fab.for bus journeys to Malaga/airport,Caves,Granada,Frigliana etc.
Would I recommend this hostal?Yes I would,but perhaps if I was to return to Nerja again for anything more than 4 days,personally I would be looking for somewhere slightly more luxurious and without the traffic noise.Lots of backpackers used this hostal during our stay and I would say it is ideal for this type of traveller and good for those wanting a bit more of a longer term base.
The people running the place only had a slight understanding of English,but this wasn't really a problem and their English was definitely better than my Spanish!