Attracted by a Blend of Centuries and Cultures

ON a recent Saturday night, an invitation-only dance party was in full swing at Asia Latina, a Thai-style restaurant in the Nicaraguan city of Granada. The lights were dim, the music electronic and the kitchen that usually serves up pad Thai closed. And though the blistering sun had long set, a lingering heat hung in the room, which was decorated with Thai tapestries and Indian batiks.

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The crowd, a lively mix of the city's young and well dressed, was almost exclusively male. Out front, a rainbow flag sagged in the heavy air. "People talked about that for months," said Rafael Faria, the restaurant's youthful 40-year-old owner. "I figure if they want to come in, welcome. If not, eat somewhere else."

Such unabashed liberalism was unheard of just a few years ago in this conservative colonial town. Racked by years of war - most recently by the pro-Marxist Sandinistas from the Iran-contra days - Granada clung to its Catholic roots.

But with the Sandinistas voted out in 1990 and a growing free-market economy (though Nicaragua is still one of the hemisphere's poorest countries), the country is fashioning itself as a cheaper alternative to Costa Rica. And, in doing so, Granada is not only opening up to Western dollars, but Western cultural influences as well.

At the forefront of the tourism push are former exiles like Mr. Faria who, like thousands of other Nicaraguans, fled the country in the 1980s. He was barely a teenager. Sensing a sea change, Mr. Faria moved back three years ago, trading his tiny Manhattan apartment in Clinton for a town house a few blocks from Granada's center.

"I had really fallen in love with the country," Mr. Faria said.

And with tourism on pace to outstrip coffee as the country's largest industry, even Sandinista leaders like Daniel Ortega, who was elected president in 2006, are banking on tourism to lift the country out of poverty.

Nicaragua's tourism industry is bullish for good reason. The country's beaches are among the finest in the Americas, and among the least developed. Dozens of volcanic peaks offer treks through rain forests teeming with a rich biodiversity. And large tracts of nature reserves offer an eco-tourist wonderland.

But when it comes to Nicaraguan culture, new and old, nothing compares to Granada.

Founded in 1524 by the conquistador Francisco Hernández de Córdoba, Granada is one of the oldest colonial cities in the Americas. It was also one of the most frequently sacked, thanks to its location on Lake Nicaragua, which reaches the Caribbean by way of the San Juan River. But despite frequent sieges by pirates and would-be imperialists, a good portion of the city's colonial architecture remains miraculously intact. Add the narrow, cobblestone streets and courtyard cafes, and it's one of Central America's loveliest spots.

Like many colonial towns, Granada comes together in a tree-lined Parque Central, or central park. This one is lorded over by a massive, mustard-yellow cathedral that shines bright in the afternoon sun. When I visited this past summer, the square's western edge was lined with horse-drawn taxis. Across the park, hot dog vendors sought refuge under the palm trees' slowly shifting shadows, their carts painted with slap-dash cartoon characters like a Mickeyesque mouse and a clumsily drawn Pokémon.

Along the park's northern edge, vendors had set up small folding tables, selling bracelets, rings and other jewelry from local artisans, with prices ranging from to 0.

As the sun set and the heat let loose its grip, I came across an open-air market a few blocks south, where everything from household goods to live chickens and fresh vegetables were on sale. Then, I got lost among the winding streets lined with tiny clothing shops, scruffy coffee shops and cantinas filled with laborers fresh from their shifts. The area was anchored by two other colonial-era churches: the stunning Iglesia de Guadalupe near the lake and, to the west, the Iglesia de la Merced with its Baroque facade.

After dark, it was time to join the crowds of tourists and locals who fill the half dozen restaurants along Calle la Calzada, a bustling street filled with live guitar music and outdoor cafes that runs east from the central park.

At El Tranvia, an elegant, colonial-style restaurant downstairs at the Hotel Dario, a button-down crowd feasted on a Latin-Caribbean menu that included grilled fish straight from the lake and Creole-spiced steaks from local farmers. The crowd was split among young Nicaraguan couples enjoying the romantic atmosphere and American baby boomers poring over a list of Central and South American wines.

Granada's tourism upswing is also spilling over to the country's western coastline. While backpacking surfers have long passed through Granada, the new wave of well-heeled tourists is spurring new restaurants, hotels and tour companies outside of the city.

Among the fastest growing areas is Lake Apoyo, a nearby freshwater lake inside a volcanic crater. Several guesthouses have opened on the lake, including Norome Villas, a thatched-roof resort set in a mango grove with a spa and conference center.

Still, the lake remains relatively undeveloped, free of unsightly hotels and resorts. The crater's rim is lightly forested: green in some spots, Utah-brown in others. And thanks to restrictions on motorized watercraft, the water is clean, clear and dark blue.

But make no mistake, development is afoot. Back at Calle la Calzada, just a few blocks away from Asia Latina, there's a popular new sports pub, Zoom Bar. Instead of tapestries and batik, this transplanted honky-tonk is decorated with college football jerseys and lewd bumper sticks. The house specialty is a bacon cheeseburger with curly fries.

On a breezy Thursday afternoon, Wayne Grath, a California native who opened the establishment with his wife, Cheryl, was standing behind the bar, loudly pontificating on the city's real estate market. A pair of heavily tattooed tourists listened closely, eager to get in on the action.

It may already be too late, Mr. Grath said.

VISITOR INFORMATION

Several airlines fly from Kennedy Airport to Managua, none nonstop. Fares start at about 0 (and a tourist card must be purchased upon arrival). Granada is an easy one-hour drive from Managua. Several major car rental companies, including Hertz (505-233-1237) and Avis (505-233-3011), have offices at the A. C. Sandino Airport in Managua.

WHERE TO STAY

Hotel Plaza Colón (Calle la Calzada; 505-552-8489; www.hotelplazacolon.com), in Parque Central, is one of the city's finest hotels. The most expensive suite goes for 9 plus tax; the standard double is .

Hotel Dario (Calle la Calzada; 505-552-3400; www.hoteldario.com) offers quality double rooms for 0 plus tax. The luxury suite is 5.

Both hotels offer a courtyard pool, air-conditioning and high-speed, in-room Internet access.

Norome Villas on Lake Apoyo (505-270-7154; www.noromevillas.com) has 144 rooms including 66 Caribbean-style villas starting at plus tax in the low season and in the high.

WHERE TO EAT AND DRINK

Asia Latina (Calle la Libertad; 505-552-4672) serves Thai and Asian-fusion cuisine like "Korean tacos."

At El Tranvia (Calle la Calzada; 505-552-3400; www.hoteldario.com), the chef Vernon Hodgson shows off his Caribbean-coast roots.

Zoom Bar (Calle la Calzada, three blocks from the cathedral; 505-643-5855; www.zoombar.biz) is known for humongous burgers, cold beer and plenty of sports talk.

Café Don Simón (505-884-1393), next to Hotel Plaza Colón, serves breakfast, lunch and light dinners. The coffee comes from local growers.

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