The resort town of CANELA , 8km further east down a road bordered on both sides by hydrangeas, is slightly lower, smaller and not as brashly commercialized as Gramado. Canela offers little of particular beauty within its small urban area, but it is better situated for the Parque Estadual do Caracol (daily 8.30am–5.30pm; R$8), 8km to the north. You can reach the park by bus – marked "Caracol Circular" (4 daily) – which leaves from Canela's rodoviára; get off at the information centre in the park. From here, a path leads 927 steps down to the foot of a 131-metre waterfall from where visitors can best appreciate its power; from there you will find other small falls and the surrounding forest. A further 5km along the Caracol road is the Parque da Ferradra (daily 8.30am–5.30pm; R$8), a forest reserve offering panoramic views into the deep Arroio Caçador canyon and waterfall and onto a horseshoe-shaped section of the Rio Caí.
Canela's rodoviária (Tel:54/3282-1375) is just behind the central main street, with regular buses from Porto Alegre and Caxias do Sul and services at least every hour to Gramado. The tourist office , at Largo da Fama 227 (Mon– Sat 8am–6pm, Sun 8am–1pm; Tel:54/3282-2200), is staffed by enthusiastic students from the local tourism colleges, for which Canela has become renowned in Brazil.
There's a good youth hostel across the road from the rodoviária at Rua Ernesta Urbani 132 (Tel:54/3282-2017; R$35 per person), but over winter weekends it can be difficult to find a bed. The cheapest hotels are Bela Vista at Av. Osvaldo Aranha 160 (Tel:54/3282-2136; R$71-120) and the very similar Turis at Av. Oswaldo Aranha 223 (Tel:54/3282-8436, Web: www.turishotel.tur.br ; R$71-120), both centrally located but pretty basic, while there are a number of mid-range pousadas just outside the centre providing accommodation in comfortable but modest cabins. Try the friendly and tastefully furnished APousada Encantos da Terra, Rua Tenente Manoel Corrêa 282 (Tel:54/3282-2080, Web: www.pousadaencantosdaterra.com.br ; R$121-180). For more luxury, the thirteen-room Quinta dos Marques, Rua Gravataí 200 (Tel:54/3282-9813, Web: www.quintadosmarques.com.br ; R$261–500), is the most distinctive choice available, the imposing 1930s wooden building – in typical highland style – beautifully renovated to offer rustic-chic accommodation.
Most visitors dine at their hotels, but if you'd rather eat out , your best bet is the Coelho at Av. Danton Corrêa 251, near the intersection of the main avenue, Osvaldo Aranha, which has an inexpensive rodizio of decent local-style Italian dishes. The town's bars , clustered along Avenida Osvaldo Aranha, tend to be livelier than those in Gramado, with students spilling into the street well into the night at weekends.