Machu Picchu was not merely a lost city, but part of an entire lost region.
The location of an entire active and populated region could not have been concealed from the Spaniards, who had many allies among the Indians.
And yet the Spaniards did not know of Machu Picchu's existence.
The only possible conclusion is that the Incas and Indians at the time of the Conquest did not know of it either. Somehow the city and its region were abandoned and depopulated before the conquistadors arrived, and the memory was lost even to the Incas themselves.