After some research, this is the best hotel in Lencois, hands down. We stayed here for all nights of our trip to Chapada Diamantina, except for one that we had to sleep in Mucuge (to go to Buracao and others on the way), otherwise I would stay every night here. IMO this hotel is one of those you should be trying your best to make it fit your budget and it is worth it. Staff is great, rooms are comfortable, pool is good and best part is to sleep with the noise from the river/waterfall, which names the hotel (particularly for those like me that like to sleep when raining).
Single small complaint and likely very specific to our room was that our bathroom in the room smelled a bit like cigarettes (even though I am pretty sure it’s a non-smoking hotel all over).