This French-owned hostel has a lot going for it: Japanese-style capsule dorms (both single and double) actually offer more privacy than a standard dorm room (luggage is stored outside in lockboxes or cages) and shared bright-red bathrooms have a touch of personality. The backyard – firepit and all – is a real coup. There are impressive Villarrica views and recycling too.
Co-owner Vincent runs Aguaventura, so you're in good hands for any excursion. The original French Andes I is just down the street, but we prefer II (though the shipping-container apartment over there is fun).