As a Manhattan resident, I would suggest NOT staying at Times Square because you’ll just be surrounded by other tourists. If you’re not used to the constant crowd, staying there will not give you a break.
Most of Manhattan are within easy reach by subway, so you can stay well away from Times Square and still quickly get to it if you really need a dose of aggressive Sesame Street characters.
Check out Eventi on 6th and 30th. It’s a short walk to Chelsea, Herald Square, Times Square, and Flatiron with Madison Square Park, Eataly (the original), Korea Town, Empire State Building, etc... the Highline is also easily accessible, not to mention countless restaurants that residents actually go to instead of ones that cater to tourists.
There are also the W or Hyatt Hotels at Union Square. In early December, Union Square has the Christmas Market. They’ll be walking distance to The Village, East and West, LES, or a quick hop on the subway to SoHo, financial district.
If you really insist on a Times Square hotel, pick one on the edge, closer to Bryant Park. In December it has the skating rink and booths set up. It’s better than fighting the mob at Rockefeller Center.
Don’t miss checking out Bergdorf’s Christmas window display. In my jaded opinion, this is the only shouldn’t-miss. Tiffany always has really detailed windows as well. Saks draws a crowd, and Barney’s is always out-there. We’ll see how the bankruptcy affects their display.
The newest thing is Hudson Yards. You should walk the length of the Highline.
Have fun! NYC is great around the winter holidays.
