You'd have to look hard to find a more pleasant retreat by the lake. This old house hanging over Varenna's lakefront was taken over in 2002 by Bettina and Egidio Mallone, a friendly Italian-Swiss couple. Their plans are to renovate it into a boutique hotel but retain the family atmosphere, which has long been the Milano's hallmark, with the aid of two cats and their infant daughter Carlotta. Sadly, prices will rise slowly as they finish overhauling each room; they've already jumped up 30% from last edition's rates. The rooms were refurbished in 2003 with new beds and antique-style furnishings, each with its own color scheme. All have balconies and views -- nos. 1 and 2 open onto a wide terrace, and nos. 5 and 6 both have full-on lake vistas; the other half overlook the neighbor's pretty garden with askance lake views. The furnishings are a pleasant mix of old and unobtrusive modern pieces, brightened up with small Persian rugs. In summer breakfast is served on the outdoor terrace. They have also started serving 25€ ($31) three-course dinners (but not on Sun or Tues) out on the terrace in nice weather.