I've just been to New York and took an unconventional approach to accomodation due to the fact even the crappest of holes on Manhatten was coming in at £200 a night.
Instead, I stayed in Newark. No, it's not as mad as it seems.
I stayed at the Hilton at Newark Penn Station. I paid only £90 a night for my room and the hotel itself is linked by covered walkway to Penn Station.
Penn Station is literally 13 minutes by train from Manhattan - the railway station in Manhattan is just a 5 minute walk from Times Square. You can also take the PATH train right into World Trade Centre station further down Manhattan - its only $2 but takes 25 minutes.
So in reality I was 20 minutes or so from the centre of New York... for 90 quid a night in a half decent hotel. It worked out really well.
Even more convenient if your flight lands at Newark. Mine landed at JFK