If you are looking for some comfort in Ambalavao this is the place to go. There are two other hotels very cheap but they are very basic. It is fairly expensive for malagasy standards, but it is good, clean and has a good restaurant.
20.000 Ar. Room with double bed and cold shower. Shared toilet outside.
35.000 Ar. Room with double bed, hot shower and toilet.
This place is at the same grounds as the Antaimoro paper factory. You can see how they make paper by hand from the bark of a tree. Afterwards they put dried flowers on them. Makes a good souvenir. This is interesting and worth going to but go early before busloads of tourgroups arrive. There is a guy Adrian who can help you with arranging transport and camping gear to go to Andringitra National Park, Anjaha Park, etc.
It is a nice place to stop over for a day if you are on your way south on the RN7 from Tana. This way you can have a look at the paper factory and have a stroll on the market the next morning before continueing your journey south. Also a good base to arrange stuff if you want to go to Andringitra.
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