The tiny Cayman Islands are well-known as an offshore banking centre, but they are equally famous for having some of the world's best diving, with some of the finest coral reefs in the Caribbean, and spectacular, sandy beaches. The three Cayman Islands lie in the western Caribbean, northwest of Jamaica and are arranged in two groups. In the south is Grand Cayman, where the capital George Town is situated, and in the northeast are Cayman Brac and Little Cayman, just five miles apart. Despite being a popular destination for stressed-out executives, the islands are still ideal for experiencing a slow, gentle pace of life, and a great family holiday destination.

The majority of hotels are along the five miles of Seven Mile Beach to the north of George Town: they range from simple but quite expensive guest houses to the height of luxury. Many also offer diving packages.

THE BEACH COLONY CLUB
PO Box 903 (00 1 345 949 8100; fax: 345 947 5167). This has a low-key, more West Indian atmosphere, with that classic Caribbean beach-club feel. The 41 rooms look down from balconies or are straight onto the island's best beach, Seven Mile beach. In the middle stands the central house, with the restaurant and bar set on an attractive, breezy brick-pillared terrace. Rooms are comfortable but simple, with telephone, air-conditioning and TV.

THE HYATT REGENCY HOTEL
West Bay Road (00 1 345 949 1234; fax: 345 949 8528; www.grandcayman.hyatt.com). This is the most luxurious place to stay on the island. It is large, modern and decorated in plush, Caribbean pastel, with mock-classical columns and tall Georgian pastel.

WESTIN CASUARINA RESORT
(00 1 345 945 3800; fax: 345 949 5825; www.starwood.com).The 343-roomed Westin Casuarina has a cloistered walkway to the restaurant, painted in a shade of light blue that matches the Caymanian Sea. There is an attractive pool, surrounded by profuse greenery, above the beach where all the watersports are on offer. Rooms, cool and carpeted, have TVs, air-conditioning and fans, minibars, and most have balconies.

A number of restaurants vie for the top spot in the Cayman Islands.

HEMINGWAY'S
At The Hyatt Regency Hotel (00 1 345 945 5700). See Where to stay. A good spot for an elegant and intimate meal out. You can either dine in a formal dining room or on the terrace through the French windows. The menu is international; dishes include poached salmon with Sicilian beans.

OTTMAR'S
The Grand Pavilion Hotel (00 1 345 945 5879). Takes its name from its prize-winning chef. The indoor dining room is elegant and plush, with neat table-cloths and candles. The menu features French techniques adapted to Caribbean food. Favorites include bouillabaisse, French pepper steak (flamed in cognac and doused with green peppercorn sauce and crème fraîche), or red snapper with banana chutney and fresh mango slices.

RISTORANTE PAPPAGALLO
(00 1 345 949 1119). This has a spectacular setting on a lagoon in West Bay north of Seven Mile Beach. As the dusk falls, the mangroves around the lake are lit up, a good setting for a cocktail before you move to the veranda or the air-conditioned dining room to eat. The restaurant specialises in northern Italian cuisine, with good Caribbean seafood.

SMUGGLER'S COVE
(0 1 345 949 6003). Situated on the waterfront in town, Smuggler's Cove has tables on a terrace under the sea grape trees.

THE CROW'S NEST
(00 1 345 949 9366). Just inland from the south coast of George Town, the Crow's Nest enjoys an equally attractive setting and easygoing atmosphere. Tables are set on a screened veranda painted in pinks, oranges and blues and lit with candeles. The food is Caribbean-based, concentrating on seafood; try the fiery coconut shrimps followed by jerk turkey salad.

THE GRAND OLD HOUSE
(00 1 345 949 9333). This is a charming old town house on the shoreline south of the town. Tables are arranged on a two-tier screened veranda and on the waterfront itself, where they are hung with fairy lights. The menu is international with some variations on traditional Caribbean themes, citrus-crusted Atlantic salmon on a bed of wilted spinach or sautéed fresh snapper with shallots and mushrooms followed by heavyweight puddings. There is an extensive wine list. Closed on Sunday.

THE LIGHTHOUSE
(00 1 345 947 2047). At The Lighthouse you dine on a wooden terrace to the sound of the waves breaking on the reef. Good wine list to suit the Italian and seafood menu.

THE WHITEHALL BAY RESTAURANT
(00 1 345 949 8670). This perches on a gingerbread deck on the waterfront, with abundant greenery and bright pink décor. It offers the best simple island fare as well as a few salads, local pepperpot, coconut shrimp and cracked conch.

BEACHES
Seven Mile Beach is where the majority of the luxury hotels, watersports and diving operations are located, and it extends from just north of the capital George Town up the west coast to West Bay. Facing west, Seven Mile Beach has one of the finest views of the sunset anywhere. Other beaches include Smiths Cove, a favourite with Caymanians.

DIVING
Scuba-diving in the Cayman Islands is some of the best in the Caribbean. Cayman is known particularly for its 'walls': the islands are surrounded by a few miles of sand and reefs. Visibility is superb in the Caymans, often as far as 150ft. The Cayman Islands have strict laws for the protection of their reefs and fish, and there is zoning to encourage regeneration of fish and coral life.

DIVING
Barefoot Traveller (020 8741 4319; www.barefoot-traveller.com) organises tailor-made scuba-diving holidays in the Caribbean, Indian Ocean and Asia. A trip includes a one-day PADI course at the London School of Diving, three nights on Grand Cayman with a PADI referral course with Divetech (four open-water dives) and four nights on Little Cayma staying at the Southern Cross Club with three tow-tank boat dives. Return flights with British Airways, local flights and transfers are also included. Visit www.divecayman.ky for specialised dive information.

GEORGETOWN
The Cayman's island capital is on a broad bay in the southwest of Grand Cayman. It is a pretty modern town, with streets full of smart office blocks and air-conditioned shopping centre but is still pleasant to wander around.

AIRPORT
The international airport is at Grand Cayman, from where local connecting flights can usually be taken on the same day to Cayman Brac or Little Cayman.

AIRLINES FROM THE UK
British Airways (0870 850 9850; www.britishairways.com) flies four times a week from London Heathrow via Nassau. American Airlines (0845 778 9789; www.aa.com) also flies to Grand Cayman via Miami.

GETTING BETWEEN THE ISLANDS
Cayman Airways (00 1 345 949 2311; www.caymanairways.com) has a three times daily flight between Grand Cayman and Cayman Brac, stopping at Little Cayman en route.

Wimco Villas (0870 850 1144; www.wimco.com).

Visit in the cool, relatively dry winter (November to April).

Cayman Islands Department of Tourism (020 7491 7771; www.caymanislands.co.uk).

Always consult the Foreign Office before travelling.