While the main drag is admittedly overcrowded during peak season, there's still solace (or at least more patches of sand) to be found on Long Beach, a quick longtail boat ride from the ferry docks. There are several places to stay in this part of pretty Koh Phi Phi and there's some great snorkeling to be done right from the beach. You can easily rent equipment from most hotels and guesthouses. The water is crystal-clear, the sand soft and white and there are a few small beach bars nearby anytime you get thirsty or need a snack.
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