Having visited both towns, I would easily go for Varenna as a destination to stay at. Besides, Bellagio can be easily reached in 20 minutes from Varenna to explore and sight-see. While Bellagio is really nice and more popular among tourists, Varenna is quaint, colourful and much quieter. There is a wide range of accommodations here and much cheaper than in Bellagio. Varenna offers the feel of a small town in an absolutely beautiful setting. The town has a laid-back charm and is characteristic of colourful houses and some of the most incredible views of the lake.