Area of Dubrovnik to stay

Stay inside the walls of Dubrovnik’s Old Town. The crowds thin out the further you get from the Placa— the main pedestrian walkway that runs through the center. Just go a couple blocks above or below the Placa and you escape the crowds. Guesthouse Vicelic is where we stayed.
The main reason to stay in the Old City is to walk out the doorway of your accommodation at night and explore empty, floodlit Old Dubrovnik after the crowds have departed.
Have a great Trip!

I'd also so an exhaustive search of old town within the walls, but on my very first visit to Croatia, I stayed just outside old town up hundreds of stairs, and it remains one of the most memorable views ever. You look down and see old town, and just beyond you have the sea--marvelous! I guess technically the applicable neighborhoods would be Pile and Ploce, and as long as they are walking distance to old town for you, they would be fine.

From the view that it’s going to be pretty universally hot and crowded everywhere during the day, I always think it’s better to have a place that centrally located you can easily retreat to. It’s really hard to tell on a map, but Dubrovnik is basically a steep valley with the Stradun running down the valley floor. All those accommodations you see outside the wall to the east (and inside the wall for that matter) are a steep walk up. That’s a rough proposition in August. So, even though it’s super busy, I’d still recommend a place within the walls if you can. Lapad is also an option, but I don’t personally see the appeal of the resort dynamic and bussing to town.

Figure on getting out of the Old Town at peak daytime to avoid the worst of the heat and crowds. Lokrum and Cavtat were nice breaks, and there’s always boat excursions from the old port.