P huket is a large island. A lot of folks don't realize there are over 600 hotels and just as many more guesthouses on the island compared to Singapore which has only 250 hotels. The main economy of Phuket is tourism. The options for accommodation vary widely from very cheap to very expensive. One consideration a lot of folks have is how close they want to be to the beach. Technically all the beaches are public but there are a few exceptions where hotels have managed to get "unofficial rights" to claim the beach in front of their property. However even in those places all people can walk or sit on the beach even if they're not a Guest at the hotel.
On the bright side you can still find economical accommodation on the west side of the beach within only a stones throw of the sand. For example try Paradise Inn, it's a classic Guesthouse which was built in 1998 and features all the classic finishing you won't find in budget hotels anymore such as marble floors and granite countertop sinks.
T here are lots of options available in Phuket. But for the more popular hotels and resorts in the better locations you should book at least a couple months in advance during high season (Nov-May). Cheapest air con room rates start at around 1,000 baht in beach locations or 500 baht away from the beach, with proper resorts starting just under 100 USD for a 4 star resort at Pacific Club Resort. The there are the mainstream 4 and 5 star resorts which charge well over 200 USD and going right up. Best rates are usually found online by searching and many hotels offer best rate guarantees when you book direct. Most of the time you will pay more if you walk in.
For long term residence 2-3 bedroom furnished houses available for 7000-10000 baht/month/up (only available far from the beach). But you have to pay 3 months' rent fee in advance. In addition, luxury villas can be rented at a range of prices, depending on the season and the location and size. Anywhere from 9,000-60,000 baht per night with deep discounts available for monthly or longer terms.
T ap water is generally not potable. Liquids from sealed bottles nearly always are, and should be used wherever possible. Take care in restaurants and bars. Some may use untreated/unsafe tap water to make ice for drinks that otherwise have bottled/safe ingredients. Some residents claim that ice with round holes is made by commercial ice makers who purify their water; others state that it is wise not to rely on that claim. Tap water in most hotels should not be used for drinking or brushing teeth unless explicitly labelled as safe.