Pfaffenthal
Staying in Pfaffenthal puts you in the valley below the Grand Ducal Palace. The listed hotels here sit within 500 m of the palace: Hotel Parc Beaux Arts (60 m), Lago Welcome Palais (80 m) and Lago Welcome Palais Suite (80 m). From these addresses the palace is a 1-minute walk, so you can reach the hourly changing of the guard without crossing the city. The area is quiet, with the Grund and Ville Haute both easily accessible on foot.
Ville Haute
Ville Haute is the historic upper town and the immediate setting of the Grand Ducal Palace. Hotels close to the landmark include Serene Haven on Rue du Nord (130 m), Charming 1BR Loft in Ville Haute Luxembourg (130 m) and Guillaume Suites (170 m). All are within a 2- or 3-minute walk, which makes early starts for the summer tours simple. The streets here are the ones the palace faces, so you are in the middle of the old civic core.
Grund
The Grund sits below the Ville Haute and is reachable from the Grand Ducal Palace on foot. Among the listed hotels near the palace, Hotel Vauban (190 m) and Grand Rue Apartment by Rentaroo (190 m) are in this area, a 3-minute walk from the landmark. Staying here gives you a lower-town base with the palace and the upper streets just above. It suits guests who want to combine the visit with the Grund's own lanes.