Costa del Sol - FF7 Walkthrough
Costa del Sol is a pretty small town without much to do here. The moment you arrive your party breaks up and you can go around town and talk to each of them if you'd like. In the whole town there's only three treasures for you to collect, when you cross the bridge at the start of town, they're inside the first building you can enter. Check the basement to find the loot.
Speaking with the man who is sleeping in this building will also reveal a future side quest you can do too, purchasing the Costa del Sol Villa! To advance the story forward all you need to do is go to the beach and speak with Hojo there. Once you've spoken to Hojo I would highly recommend spending the night at the Inn before leaving.
After you've done that you can leave town and head to our next destination, Mount Coral. The exit of Costa del Sol is around the same place we entered, just go under the bridge to leave.
Our next stop is a small cave which you will have to travel west through the mountains to reach. On your way here you'll pass a few other important land marks that we can't reach yet, like cave with hidden Materia and the Gold Saucer. A screen shot of the area you're looking for is shown below.
Note: I recommend putting Barret in your party at this point. There is going to be a boss fight in a little where you can only use Barret and you'll want to make sure he is not under leveled for that fight.