With scores of cheap guesthouses and fascinating excursions to hilltribe villages and elephant safaris, the message soon spread that Chiang Mai was an alternative destination to Bangkok and the beach resorts of southern Thailand like Phuket. As its popularity grew, the city developed a reputation as a place where you could find an "authentic" Thai experience. People came from all over the globe to take courses in Thai cooking and Thai massage and shop for silk and authentic handcrafted goods.

Slowly, but surely, Chiang Mai became a major international destination. When a five-star hotel was built on a rice farm in the nearby Mae Rim valley a decade ago, a new era had arrived. The Four Seasons Resort Chiang Mai (formerly the Regent) brought a new well-heeled clientele to the area. The resort is considered one of the top resort hotels in the world, boasting a world-renowned spa and spacious suites with teak floors and private outdoor pavilions.

Besides its natural beauty and the 300 temples that dot the city, the ace up Chiang Mai’s sleeve has been its handicraft and manufacturing industry, which has been developing at a breathtaking speed. The region’s distinctive Lanna architecture and style has become the latest international fashion trend and it is not unusual to rub shoulders with buyers from fashion houses and the major international hotel groups in the markets and workshops which surround the city now.

It was only a matter of time before more designer hotels started springing up. It seemed inconceivable that anyone would challenge the Four Seasons’ dominance, but there are contenders. Leading the pack is the breathtaking Mandarin Oriental Dhara Devi, built in the midst of rice paddies and a tropical rainforest. The resort is a 60-acre recreation of a Lanna royal city - complete with a replica of Myanmar's Mandalay Palace which houses the spa. The overall effect is truly spectacular, from its horse-drawn carriages to the 5,000-book library.

Here you will find lotus ponds, moats and fortified walls, towering palaces, a marketplace and even a town green and a temple. With an army of merchants, weavers, cooks, farmers, woodcarvers and massage therapists on hand, it verges on becoming a theme park to Lanna culture but it is far too stylish for that. Guests are housed in vast villas and suites with splendid views of the surrounding countryside. Not surprisingly, the hotel has already become sought-after for weddings and other events.

In the heart of the old city, which is surrounded by a moat, is a totally different kind of resort, the Rachamanka. This stunning hotel was designed by its owner, Thai architect Rooj Changtrakul, based on Thai temples of the 13th and 14th centuries, the height of the Chinese influence in the region. It is an intimate hotel of only 26 beautifully appointed rooms, built around a series of courtyards framed by frangipani trees and flowing bougainvillea.

Breakfast in the courtyard off the elegant dining room is a daily highlight. Relaxation is almost mandatory here – you can read in the hotel’s own library, lounge alongside the 60-foot swimming pool or take a two-minute stroll to the Wat Phra Singh, one of the holiest Buddhist temples in the city. If the Rachamanka is out of your price bracket, you can find elements of its charm and style at Tamarind Village, a nearby hotel designed by the same architect.

The Chedi, Chiang Mai’s newest five-star resort, is due to open this month. Strategically located on the banks of the Mae Ping River which flows through the city, the hotel is stylish and modern. Each suite opens onto a private courtyard, and a private butler service is allocated to each room. Besides the river views from most of the high-tech rooms, the hotel’s most distinctive feature is likely to be its restaurant, which lies in the former British Consulate building.

While the Chedi is a short stroll from the Night Bazaar, the Dusit Group’s new hotel, D2, lies in the centre of the busy market. This hotel is a new concept for the Thai group that manages the Dusit Thani Hotel in Bangkok. Modern in design, the hotel seeks to balance international standards with Thai hospitality and the feel of south east Asia.

Another hotel being planned close to the bazaar is the Shangri-La Hotel and Spa. Designed as deluxe city resort, it will be surrounded by lush gardens with an indoor and outdoor swimming pool. It is due to open in July next year. The Four Seasons group is not resting on its laurels, either. While ensuring that its Chiang Mai resort continues to win international awards, it is set to open a luxurious tented camp near Chiang Rai. The Four Seasons Tented Camp Golden Triangle, situated near the border more famous for opium and arms smuggling, is expected to open early next year.

While Chiang Mai is firmly cementing its reputation as a city of style, at heart it is likely to remain a rather quaint provincial centre. Even now, as tourists swarm in, the local people seem quite content to go on with their lives as they have for generations. Wooden Thai houses lie alongside smart homes catering for the growing number of expatriates, while small Chinese shops happily do business down the road from the new Starbucks and McDonalds outlets. On the outskirts of the city, where the Mandarin-Oriental and Four Seasons are setting new standards in luxury, you can still spot herds of water buffalo roaming the rice paddies. The Lanna lifestyle will remain.