What we did: LAX > Lima Airport directly to Cusco > 1 night in Cusco > Bus to Ollantaytambo to stay for 2 nights > back to Cusco for 1 night.
“Collectivo” Bus to Ollantaytambo
After spending one night in Cusco, the main city in the Sacred Valley region, we hopped on a bus to Ollantaytambo (aka “Ollanta”), where we would stay for 2 nights and from there take a train to Machu Picchu for a day trip.
Fernando is in charge of transportation when we travel. He read that we needed to take a van, or “Collectivo” to Ollanta, which would cost S/.10-15 ($3.80 – $5.70) per person. Cusco is a mid-sized town and things are run a bit more informally. We walked down the street where we were told to find the Collectivo. There's a guy on the sidewalk calling “Ollanta, Ollanta!” He told us it was S/.10 per person and we got in the van. The van doesn't leave until it fills up (about 10 passenger seats). Another tourist couple gets on, they are about our age and from Texas. The dude says he doesn't travel much, but his wife likes to travel and they just got married.
A few locals get on, and then off again since the van doesn't leave. The man assures us it will be 15 mins (as he said when we first got on, like 20 or 30 mins ago). He then tells us that we can leave right away in another car if we pay S/.20 per person, for the 4 of us (all the Gringos on the van). Fernando says no, we will wait. He asks again later. Then, after about 45 mins to 1 hour, he says S/.20 but Fernando negotiates down to S/.15. By this time several locals are on the van, but it isn't full. The 4 of us agree and we take off.
We realize later that this isn't a direct (non-stop) van as we make a few brief stops to pick up more passengers. It fills to the brim and we make 2 main stops to drop folks off. Then, at the Urubamba stop, there is only the 4 of us Gringos and 1 local Youth on the bus. The driver gets off and talks to a guy. He comes back to ask the Youth to pay — we gleaned that the Youth didn't have enough funds. The driver tells us to get off the van and go into another car, which will take us to Ollanta. Fernando ascends to our leader since he speaks Spanish. The other Gringo dude, less well traveled, is a bit worried. I am a tiny bit worried, but Fernando isn't so I go with it. The driver says the taxi will take us and we don't have to pay anything else.
Fernando says to the Gringo, “We'll get there.” We put our stuff in the trunk and in 20 mins., we arrive in Ollanta. We later realized we just got on the non-direct Collectivo to Ollanta. One could pay more and get into a taxi as well. It wouldn't be as fun though.
It is good that our hotel in Cusco offered to hold a bag for us. We unloaded (most) of our unneeded things into the Rollie bag and left that at the hotel. That turned out to be a GREAT idea since Ollanta is totally cobblestones, without cars on many roads. We had to walk from the main plaza to our hotel, which is easy with backpacks.
We found our hotel pretty easily, which is called Hostal Iskay. I am not sure what the difference between a hotel and a hostel (or hostal) is, as the place was just great and they offer towels, soap, housekeeping service, and we had a private bathroom in our room. I booked it on www.bookit.com, it was only $50/night, rustic and had the best views of the ruins. If you stay there, ask for Room #7 (of 7), amazing views of the ruins. Fantastic! Breakfast was included and the staff were very nice. The place was #1 on Trip Advisor for specialty lodging. It was a great location in the town, 5 min walk to the center and main plaza and 15 min walk downhill to the train station.
The best part was that the receptionist, Eddie, asked when were were going to Machu Picchu. We said the next day on the 6:40 am train. He offered us a box breakfast, which was perfect. We highly recommend Hostal Iskay!
We also highly recommend staying in Ollantaytambo, just a ~1.5 hour train ride to Machu Picchu, over staying in Aqua Calientes (aka Machu Picchu Pueblo). It is a charming small town, is an archeological site and lots of Inca Ruins and remnants. We read that Aqua Calientes is uncharming, expensive, and just built-up for tourists — matches what we observed! Everything is expensive there, so it is better to bring your own everything if you can, including your lunch and water. We didn't plan well, so we had to buy lunch in town. We picked up sandwiches at the Aqua Calientes train station for S/.10 and water in the park for S/.8, which isn't too bad but is about 2-4 times the cost normally.