What standard of accomodation are you looking for, personally i would be looking at the Med palace complex but would look at staying at the julio ceaser or possibly look at staying at the noela sur.
If i had the choice i personally would not want a hotel, so many different restaurants of high quality food and reasnable prices. Accomodation wise try looking at the oasis del sur district, a very up and coming district with some very nice apartments.
We are off there in 6 weeks and a 2 bedroom apartment with all the mod cons and i really mean that cost £700 and the flights around £200 per person so for a family of 4 £1500. That to me is a bargain and trust me i have been travelling to tenerife for 23 years and certainly could write a book about it.
Good luck on your choice of hotel, but take my advice look for a nice apartment and eat out in the many different restaurants

The Bitacora in Playas is a great hotel - we have been there twice now and cant fault it, however, we are trying the Noeila Sur this year, fingers crossed for you!!

Jackie, Clartes4ever is right. We have bought an apartment on a brand new compex in the Oasis Del Sur area of Los Cristianos. It's a great location, about 10 minute srtoll to the centre but away from all the noise. You'll also find that booking a privately owned apartment and your flights seperate work out cheaper than booking package and the service is more personal. Check out our website to get an idea of the quality you would get, not just from us but many other owners in this area.