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Can a hotel cancel a confirmed reservation?

Yes. The best you can do is report to booking.com and hope they get them to honor the original amount. This behavior is unfair however hotels and airlines sometimes post wrong fares. When they discover it, the decent ones honor the wrong fares.

Cathay Pacific error sees $16,000 flights sold for $675

Thanks to a glitch, $16,000 first-class seats sold for $675. Errors
like these are more common than you’d think.

The airline quickly addressed the problem but agreed to honor the
heavily discounted fares.

However many times the organizations that don’t care about customer service refuse to honor the fare.

You don’t have much recourse because you’re not going to file a lawsuit about it, neither can you force them to give you a room when you arrive there.

The booking.com terms and conditions state, in part:

Obvious errors and mistakes (including misprints) are not binding.

All special offers and promotions are marked as such. If they are not labeled as such, you cannot derive any rights in the event of obvious errors or mistakes.

You didn't say what the price was that you paid or whether it was marked as a special offer or promotion, so it's impossible for us to say whether this alleged pricing error was "obvious" or not. But you should still consider contacting booking.com anyway. In no event should you contact the hotel before exhausting your options with booking.com.

According to this page by the Barcelona City Council's Municipal Consumer Information Office (OMIC), the first thing you should do is contact the business to try to mediate the complaint. If they don't give you a resolution within 30 days, you can lodge a complaint with them.

The relevant quote from the page:

We remind you, in accordance with Decree 98/2014 of 8 July, on mediation procedures for consumer relations, that the first thing you must always do is contact the company you have the problem with directly, so that you have evidence of your claim or complaint. Once you have raised your claim or complaint with the company, it has a deadline of 30 days to reply to you. If it does not reply or the reply is not satisfactory, you may submit a claim or complaint with OMIC for us to study and process.

Only Barcelona City Council's Municipal Consumer Information Office (OMIC) is authorised to handle consumer affairs, and when the consumer or the company the claim or complaint is against belong to this municipality.

This should have been a comment but I am forced to expand. I am not 100% sure because IANL and I don't have track of Spanish and European laws, but I am familiar with most principles.

Basically, Europe protects consumer as they are in the weakest position. You have likely booked all your transports and entertainment for your trip, so you might suffer extensive damage by such a significant price change.

E.g.

• The new price has significant impact over your budget


• If you choose to cancel, you will lose significant amounts of money already booked for other expenditures as mentioned above


• If you choose to look for another hotel, you might fall into unfair pricing

From your description, the hotel made a mistake and admitted the fault, but is refusing to honour what looks to me a regular contract.

This all looks to me like an "Unfair treatment". That page shows examples of unfair treatments but none fall into your exact case.

What you can do

More than complaining with the hotel citing European regulations (what rule? I am no lawyer, sorry), if the situation gets worse and the hotel refuses to accommodate, you should be eligible to get assistance from Spanish consumer protection associations (e.g. ECCES, I am not associated with them).

Normally, a lawyer will find the rule applying to your case and prepare a formal warning letter to the hotel. The hotel is likely to accept to accommodate to avoid expensive litigation costs.

Of course, anyone here on Travel SE who has legal information on the exact rule codes can provide feedback in an answer here, so you can write your own complaint letter.

Edit

If the hotel hadn't yet confirmed your booking, chances might be that they could cancel your booking. A confirmed reservation is a contract at all effects.

I don't have direct experience in hospitality laws, but consider travel rules as example. Train and air lines are obligated to guarantee the travel to the passenger at the cost of bringing him/her with another carrier and sustain all the costs. The same principle should apply to hotels.

Some jurisdictions allow unilateral change of price only within specific sectors, bounds and conditions. But that's a bit out of scope.

It's funny you mention this, because I've had the exact same issue with Booking.com in my most recent (and only) booking with them. The accommodations in question decided after I'd paid that they actually intended to reserve the rooms for a wedding party. "Oops." I also note that the letter you received sounds suspiciously like a form letter...

Booking.com officially claims they are merely a matchmaker and do not guarantee anything, however in my case I was able to get them to give me another reservation at a different hotel nearby for the same price I'd originally paid. It took some back and forth--at first they wanted to put me in a hotel 20 minutes farther away from the event I'm attending than the original booking was--but I eventually managed to get them to make it right. (Supposedly, that is; they've had me pay upfront and won't reimburse me the difference in price until after my stay, so we'll see if that's another huge fight. Keep your receipts.)

At the end of the day, I don't see a way you can force the original hotel to honor the deal, but if you get Booking.com involved they may be able to help you. I would start there.

It may be that the agency you booked through (Booking.com?) is the one that erred. IF that is the case, they are responsible for fixing it. If the reservation made it to the hotel, and the hotel accepted it, they are on the hook for it.

I worked Customer Service for a major hotel chain for 8 years. Hotels overbook the number of rooms, expecting cancellations. Occasionally, it did happen when guests would show up and the hotel was simply overbooked. In that event, it was our chain's policy to "Walk" the customer by obtaining a room for them in a nearby hotel and comping the night. For the loyalty club members they frequently went a step further and gave them additional points, or other benefits.

Bottom line is that they CAN do it but if they expect to stay in business long they'll try to make it right for the customer. I would advise to contact the hotel's corporate offices.

I have been told by hotels that my reservation conflicts with planned construction work, or the room just isn't available, and in these cases they've arranged some nearby alternative hotel. Here, clearly, the room is available, and they just regret offering it for the particular price. And not a decimal-point error where they offered a $300 room for $30 or $3; this "error" is within the price spread that hotel rooms might realistically be discounted.

If it is an honest error, it's a serious incompetence with online sales, coupled with a very stingy management attitude. It has all the hallmarks of a "bait and switch" tactic, in which a good is advertised at a price, but once the customer is "in the store" they're told that good is not available (at that price) and steered toward a pricier option. "Bait and switch" is a very well-recognized term in US and Canada consumer law; I can't guess if the equivalent exists elsewhere.

I agree with the others that a complaint to the local business regulator is in order. My own response would be to prefer another hotel, if a reasonable alternative is available. If this hotel is still preferable, you might write back with "I'm very disappointed that you've chosen not honour the reasonable price at which your rooms were advertised, and which I reserved in good faith. I would hope that you'd reconsider and honour this reservation as booked. If not, you may consider this reservation abandoned."