Your question answers a lot of potential letter writing questions and will make your letter a lot more focused than just a paragraph or two about your vacation.
The first thing that you have stated is that your vacation narrative needs to be in the form of a letter. That's not a crazy, weird format or anything like that, but it does mean that you should start with the standard "Dear Grandma and Grandpa" line. It also means that you should end your letter with "Sincerely" or some other equivalent.
The second thing that you have stated is who your audience is. That's sometimes the hardest part of writing -- figuring out who your audience is. Because you know who that audience is, that will guide your voice and your tone. I will assume that you know your grandparents fairly well. That means that your tone and language can be friendly, casual, and at times even informal. You would not write that way if you were writing a letter to your boss.
The third writing question that you have answered is topic. You have said that your topic is about your vacation. Before you start writing the letter, make a list of things that you did during your vacation. Then write a few adjectives that describe how those activities made you feel. Finally, list out a few thoughts about why those activities made you feel that way. Once you have your basic brainstorming done about what you could put into your letter, choose a few of them and write about them in your letter. Do separate paragraphs for each thing. Because you are writing to a family member, I also recommend asking some questions about how they are doing. That way, the letter resembles a conversation instead of a briefing about your summer.