Puebla: The Colonial Heartland Option
Puebla sits roughly two hours east of Mexico City on the autopista, and the zócalo becomes the centre of a month-long fair that pairs a craft market with seasonal food stalls, a large nativity display and evening concerts around the cathedral. Hotels in the Centro Histórico cluster within ten minutes' walk of the square, and December rates rise noticeably on weekends, so book a weekday if you can. The city stays genuinely cold at night in December, so choose a hotel with heating rather than relying on blankets alone.
The strongest reason to add Puebla is the side trip to Cholula, twenty minutes away, where the pyramid and the covered market give you a quieter version of the same season. If you want one base for both cities, stay near the zócalo and use the Puebla bus station rather than driving. Skip the more distant craft villages in the last week of December unless you have a car; transport thins out and the markets wind down.
Oaxaca: Where December Is the Whole Month
Oaxaca's December calendar is the most concentrated in southern Mexico: the Noche de Rábanos on 23 December fills the zócalo with carved radishes, the posadas run nightly in the days before Christmas, and the craft market at 20 de Noviembre and the Sunday Tlacolula fair cover gift buying well beyond the city. This is a walking city — the centre is compact and hilly — so a hotel between the zócalo and Santo Domingo keeps you inside the action without a car.
The trade-off is cost and crowding. Christmas week is peak domestic tourism, and centro hotels fill months ahead; the last week of December is tighter than the first. If you want value, come in the first half of the month, when the posadas are running but rates are lower. Book early for the final week and accept a fifteen-minute walk from the centre if you leave it late. Oaxaca is my pick of the four for a first Christmas in regional Mexico.
Guadalajara and Tlaquepaque: Big-City Convenience
Guadalajara works as a December base for travellers who want city comforts alongside seasonal activity. The central market near San Juan de Dios and the plazas of the centro carry stalls through the month, and a short bus or taxi ride south brings you to Tlaquepaque, where the Independencia pedestrian street and the Parián square hold craft stalls and mariachi in the evenings. The light display along Avenida Chapultepec is an easy evening walk from hotels in the Lafayette and Americana districts.
Guadalajara's advantage is capacity: there are far more hotel rooms here than in Oaxaca, so you can book later and still find something near the centro or in Chapultepec. December weather is mild and dry, roughly 20°C by day. The market aspect is weaker than Oaxaca's — it is a fair, not a full season — so pair it with a day trip to Tequila or Tlaquepaque rather than expecting a market-centric trip.
San Miguel de Allende and Guanajuato: The Colonial Pair
Guanajuato's Christmas fair runs in the Jardín de la Unión and along the adjacent streets, with the callejoneadas — organised night walks with music — continuing through December. San Miguel de Allende, an hour away by road, adds a smaller market in the Jardín Principal and the traditional posadas. Both cities are about four to five hours from Mexico City by car, and both are hilly; hotels close to the centre cost more but save you steep walks at night.
Of the two, I would book Guanajuato for a livelier season and San Miguel for a quieter, more composed stay — but San Miguel's hotel prices run higher for the same standard. Neither city has the variety of Oaxaca's calendar. If you only have a week, choose Oaxaca or Puebla over trying to combine both, and use Mexico City as your arrival hub since it has the most flight connections.