Aside from Provincetown, Massachusetts, Key West is probably THE hot spot for gays and lesbians. Key West has always been a place for off-beat, funky beatniks and generally laid-back folk. Gay guesthouses started springing up on the island in the 70s, and the city has been a mecca for alternatives ever since.
Gay and lesbian travelers will be in their comfort zone in Key West. It's pretty much safe to crash anywhere, as nearly all hotels, motels and other lodging options are at the very least gay-friendly. If you're planning on visiting during the annual Fantasy Fest, make sure you make reservations at least six months in advance. This is the city's most renowned festival, and is attended by many gays, lesbians, bisexuals and members of the transgender community.
Atlantic Shores Resort is a great place to stay when visiting the Conch Republic. This resort, directly on the beach, throws an afternoon tea dance on Sundays and is a great place to meet other gay travelers. There are many gay and lesbian bed and breakfast establishments as well, including the Rainbow House for women. Try a hotel on Duval Street, the main drag in town. Keep in mind that many gay and lesbian establishments are situated more to the eastern end of Duval St.