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Is to stay in the outer boroughs and take the subway into Manhattan. If you are flying in, there are fairly inexpensive major chain hotels near the airports in Queens, and if you are driving in there are even more inexpensive hotels in Queens away from the airports. The only problem -- and it's the biggest gap in NYC's otherwise great mass transit system -- is that it is fairly complicated to get from the airports to Manhattan involving either a train to the plane and transfer to the subway or a bus and transfer to the subway.
Also, many of the most interesting things to do are in the outer boroughs. Manhattan, especially midtown, has become Disney Land, and your tourism experience will consist mostly of being crowded together with other tourists.
Some alternative places:
"Hippest" neighborhood -- Williamsburg, Brooklyn. Go bar hopping on a Friday night. This is what the Village, Soho and the East Village were like 30 years ago.
A taste of middle class urban life -- Park Slope, Brooklyn. Walk up and down 7th Avenue and 5th Avenue, eating great food, bar hopping and window shopping in some of the most cutting edge boutiques in the city. This are several writers communities here, as well as middle class professionals living in Brownstones.
Coolest African American neighborhood -- Fort Greene, Brooklyn and within walking distance from Park Slope. Ever since Spike Lee based his film production company here 20 odd years ago, this area has attracted African American and many young white people involved in film, television, the arts, music, as well as the corporate and financial sectors. Moe's Bar is the must see place, a small bar on Lafayette that is maybe the most integrated social scene in NY, and features anime and independent film playing in the background. It's also a hard core blue business that donated lots of bar profits to the Kerry campaign in 2004. You'll easily meet lots of 20 something people to talk to about life in NYC.
Best ethnic food -- Queens, in several areas. As a foodie, I can tell you the very best food in NYC is no longer in Manhattan. It's the Latin food around Roosevelt Avenue in Jackson Heights and the Asian food along Northern Blvd. Jackson Heights has incredibly cheap and authentic Mexican, Salvadoran, Peruvian and Colombian food, and it's easy to get to by subway. Northern Blvd is a slog to get to by train and bus, but if you are driving it is easy. Over the last 4 years I have been trying to eat my way from Bayside to Flushing to the east River, and it's some of the best food I've had anywhere in the world, including China and Singapore.
My one Manhattan recommendation -- the East Village. Although the overwhelming majority of people you meet here will be what we call "out of towners" -- ie people who have adopted NYC as their homes -- it is still a fairly young and hip place to hang out.
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