I don't normally do commercial endorsements, and the folks concerned have no idea I'm posting this. But...
I just rang the Atlantis in Picton to book a night on my way to the Extreme Picnic in Blackball. The whānau who run the place are so lovely!
It's one of the few colorful, old school backpackers hostels left in the country, and I love staying there. So much that I sometimes stay an extra night in Picton just to spend a bit more time enjoying the vibe;