"On a promontory between two rivers in the jungles of northern Laos nestles a small, gentle town of mouldering villas and shuttered shopfronts. By day the dawdling streets of Luang Prabang are dotted with parasols. By night, the black skies are clotted with stars and thick with the scent of frangipani," wrote Christopher Kremmer in Bamboo Palace. Things have changed. In 1995, Luang Prabang was designated a World Heritage site; many of the 'mouldering villas' have been renovated and building work on the others is in full swing. Shops are open and the night market, a traditional event banned in 1975, is again a daily occurrence.

Satri House (satrilao@hotmail.com) is a small hotel of seven rooms run by Lamphoune Voravongsa, who also has a Lao silk business and several shops selling goods of impeccable taste. Not in any of the guide books, the hotel was a wonderful discovery and had a lovely garden; each room was different, although the soap in each was wrapped in a lotus leaf and a selection of antiques were scattered throughout.

Henri Mouhot was the first European to reach Luang Prabang, which he likened to Geneva, and also the first European to 'discover' Angkor Wat. He wrote: "The situation is very pleasant: if the midday heat were tempered by a gentle breeze, the place would be a little paradise" - Travels in Siam, Cambodia, and Laos, (1858).

A century later, Norman Lewis wrote in his atmospheric book A Dragon Apparent (1951): "Luang Prabang lies at the end of a long, curling descent from the mountains and through smoking bamboo groves, on the banks of the Mekong. It is built into a tongue of land formed by the confluence with the river of a tributary; a small, somnolent and sanctified Manhattan Island".

He used the same analogy in The Changing Sky: "Glimpsed from the road above it, through the golden mohur and the bamboo fronds, Luang Prabang, on its tongue of land where the rivers met, was a tiny Manhattan - but a Manhattan with holy men in yellow in its avenues, with pariah dogs, and garlanded pedicabs carrying somnolent Frenchmen nowhere, and doves in its sky".

We lunched at Park Houay Mixay Restaurant (Ban Xieng Monane, Sothikhoummane) away from the main tourist area, where I tried Mekong weed with sesame which was like a slightly oily but crisp seaweed. The grandest hotel with over 30 rooms is the Pansea Phou Vao. We went there for drinks and although I felt that we could have been almost anywhere in Asia, the infinity pool and the candle lanterns in the trees made the whole place seem magical.

The climb up to Phou Si, the temple which at night seems to float over the town was slightly hard but nothing to how it was to Norman Lewis: "The climb up to this. . . was so thoroughly exhausting that it used up the day's supply of energy" - Lewis seems to have had Luang Prabang malaise whereby the population is 'trance-bound' and subsequently had to see a doctor. The view from the top looking down on the Mekong was spectacular and even with his exhaustion Lewis was able to write: "In either direction one looked out upon a very Chinese scene of mountains and rivers barely sketched in mist. It was viewed through the bare scrawny branches of frangipani trees planted round the pagoda".

Most boys in Laos spend a proportion of their lives as monks (this is also an education). Our guide Khamsouk, (khamsouk@yahoo.com), who was still young and spoke good English, had been a monk for over a decade. He had thought of staying for the rest of his life but one day as a way of practicing his English he had written on the blackboard that he wanted to work in tourism. This had been spotted by a Frenchman who had eventually enticed him out of his monastery and he started work on the day he left. There is a mutual dependence between the monks who beg for their food and the people of Luang Prabang - an exchange of bodily for spiritual sustenance.

Seeing the monks beg for their daily bread is a stark reminder of how much we, as affluent westerners, take food for granted and it is a humbling experience to watch tehm walking down the street at 6.30am having rice put into their bowls.

The mornings in Luang Prabang are surprisingly cold - a thick mist lurks over the river and town until about midday when it disappears. Having thought that the Asian part of my trip would be hot, I was ill-prepared and so had to wrap myself in every available layer as we got on a boat to go to the Pak Ou caves about two hours up river.

The Mekong is relentlessly brown but the terraces of corn, peanuts, beans, garlic and lettuce along the river banks are a welcome change of colour. The Buddhist caves Tham Ting and Tham Phoum are the best known and are used as places to leave old and damaged Buddhas. Just beyond the caves another river, the Ou, joins the Mekong and as we started up this the sun broke through showing that we had actually been going through the most stunning mountain landscape. Noodles and chicken at Samsara (satrilao@hotmail.com), a restaurant owned by the same woman who owns our hotel, was welcome after a long day on the river.

Geneva? Manhattan? Luang Prabang didn't seem like either to me but rather very much its own place: "For me Luang Prabang is the real Laos. People are different here from elsewhere in the country. Religion is still respected and once you are here you feel quite close to nature" (Christopher Kremmer, quoting Santi Inthavong).

Times recommends

• Bogus websites are conning hundreds out of their holidays
• The complete last minute holiday guide
• Croatia: the flashing blades of Korkcula