Koraku 幸楽 is a somewhat run down ryokan hotel where little seems to have changed since the early 1960s. It definitely has character, but sadly few guests. Go up the main street from the station and turn left just after the hospital. Tel. 0856-72-0501. ¥10,500 for a tatami style room with attached toilet and bath including breakfast only.
Star Inn
53-6 Oaza Ushiroda
+81 0856-72-0136
Rooms from ¥6500, includes breakfast and dinner
Family ryokan just a minute from JR Tsuwano Station.
Noren-yado Meigetsu
665 Oaza-Ushiroda, Tsuwano-cho
+81 0856-72-0685
Rooms from ¥10,500, includes breakfast and dinner
Very nice ryokan just off Tonomachi. Some rooms have own bath; others just use the ofurou.