Have a look at Dahab. There are some big hotels but also a string of smaller hotels up the coast. The snorkelling is excellent, much better from the beach than Sharm and Hurghada, where you really need a boat trip to see the good stuff. It is closer to the Israeli border if that bothers you but I’ve been a few times and always felt very safe.
Slight hijack – what’s Hurghada like generally?
I liked it as it is more of an Egyptian town, still very touristy but has a rougher, earthier side when compared to Sharm which feels very fake. Maybe not for everyone but I enjoyed wandering around when not in the sea. Hard to get out of town for a wander by yourself but you can jump on a bus to some amazing places like Luxor, Kings Valley, Aswan. All quite touristy but if you get up early and are willing to walk a bit you can have a nice experience away from everyone.