Buses from Kunming West Bus Station take about 4,5 hours and cost 100 yuan for an ordinary bus and around 130 yuan for an express luxury bus, and will bring you to Xiaguan (Dali New City). Some buses go to Dali, too, so check with the driver. In Xiaguan, there are three different bus stations, to reach the train station, go east along Jianshe Lu and Dianyuan Lu. From Xiaguan Train Station (in Dali New Town) you can take bus 8 and bus 4 (1.5 yuan, 45 minutes approx. 18 km) to Dali Old Town 13 km to the north (Bus 4 also runs through the town). It's also possible to catch a white mini-bus on Jianshe Lu that run between Xiaguan and Dali, there's usually a white sign displayed inside the front wind shield that reads (大理<->下关) in Chinese. The cost for the mini-bus is 3 yuan per person. Taxi fare between Xiaguan and Dali should be around 40 yuan.
If the expressway is closed or under construction the bus may opt for the more scenic route akin to the notorious "road of death" in Bolivia, though paved.
Buses coming south from Lijiang are about 60-80 yuan and stop outside the old town, from where it is possible to get a taxi or walk to the main guesthouses. You can save about 20 yuan on the Lijiang bus by simply hailing one on the highway east of the old town.
There is a bus service to Xiaguan from Jinghong, Xishuangbanna prefecture, which has buses running at 17:00 and 21:30, possibly earlier too. The ticket price was 195 yuan and the journey was about 17 hours. The bus used on this route is a sleeper bus so you get a fairly comfortably bed and a blanket. This service may be useful for people who have arrived in China from northern Laos, e.g. Luang Namtha.
There are several night trains from Kunming to Dali Train Station (in Dali New City) leaving 8PM-11PM, and arriving from six to eight hours later. The cost is ¥105 for a night trains sleeper bunk, and ¥31 for day trains hard seat. Bus 8 to the old town leaves regularly for ¥1.5 from just outside the station, terminating at the West Gate. There are currently also 2 trains daily from Lijiang to Dali and back. The ride takes nearly 2 hours. Cost is 30¥ for hard seat. The train actually only has hard sleeper cars, but you are not allowed to lay down.
Dali has an airport located to the east of Dali New City, about 45 minutes drive to Dali old town. There are no airport busses. Taxis are waiting but cannot always be trusted to take you to the guesthouse/hotel you want to go to as they get commission at a lot of hotels. Better book an airport pick-up with the hotel you booked. Flights from/to Kunming: only morning flights at the moment (Nov, 2009). Depending on the time of year you can get discounted tickets (around 400 yuan one way Dali-Kunming) but you will need to book well ahead. Full price is 750 yuan (680 + 70 airport tax, nov 2009). From major Chinese cities (Beijing, Shanghai, Guangzhou) it is possible to book a flight to Dali but always with a stopover in Kunming. Best discounts apply to tickets booked 15 days+ in advance.
Alternatively, you can go to Kunming Changshui International Airport by plane. It is located in the eastsouth of Kunming, the capital city of Yunnan Province. (It is one of the most important and the busiest international airports of China.) You can then take the Airport Shuttle bus  from Kunming airport. They operate 6:30-22:00 (Beijing time).
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