Old South American hotel outside California (5)
I believe the answer is:
incan
'old south american' is the definition.
(I've seen this before)
'hotel outside california' is the wordplay.
'hotel' becomes 'inn' (inn is a kind of hotel).
'outside' indicates putting letters inside (some letters go outside others).
'california' becomes 'ca' (abbreviation).
'inn' enclosing 'ca' is 'INCAN'.
(Other definitions for incan that I've seen before include "Pachacuti for example" , "Of an ancient Andean culture" , "like former S American civilisation" , "Relating to pre-conquest Peruvians" , "Relating to ancient South Americans" .)