There are many types of tourist accommodation, ranging from hotels, pensions and rented villas, to camping and even monasteries.

"7% VAT is not included" is a common trick for mid-range guesthouses and hotels: always check the small print when you choose your place to stay. VAT is IVA in Spanish.
Small villages
Besides the coasts, Spain is rich in small tourist-friendly inland villages, like Alquezar: with narrow medieval streets, charming silence and isolation, still good selection of affordable restaurants and accommodation.
Casa rural, the bed and breakfasts of Spain
For a more homely sort of accommodation consider the casa rural. A casa rural is the rough equivalent to a bed and breakfast or a gîte. Not all houses are situated in the countryside, as the name implies. Some are situated in the smaller towns, and they are in virtually every province.
Casas rurales vary in quality and price throughout Spain. In some regions, like Galicia, they are strictly controlled and inspected. Other regions are not so thorough in applying their regulations.
Hotels
Many foreign visitors stay in hotels that have been organised by tour operators who offer package holidays to the popular resorts on the costas and islands. However, for the independent traveller, there are hotels all over the country in all categories and to suit every budget. In fact, due to the well developed internal and foreign tourism markets Spain may well be one of the best served European countries in terms of numbers and quality of hotels.
Paradores
A parador is a state-owned hotel in Spain (rating from 3 to 5 stars). This chain of inns was founded in 1928 by the Spanish King Alfonso XIII. The unique aspects of paradores are their location and their history. Found mostly in historical buildings, such as convents, Moorish castles (like La Alhambra), or haciendas, paradores are the exact opposite of the uncontrolled development found in coastal regions like the Costa del Sol. Hospitality has been harmoniously integrated with the restoration of castles, palaces and convents, rescuing from ruin and abandonment monuments representative of Spain's historical and cultural heritage.
For example the parador in Santiago de Compostela is located next to the Cathedral in a former royal hospital built in the year 1499. Rooms are decorated in an old-fashioned way, but nevertheless have modern facilities. Other notable paradores are inArcos de la Frontera, Ronda, Santillana del Mar (Altamira cave) as well as more than one hundred other destination all over Spain.
Paradores serve breakfast (about €10) and often have very good local cuisine typical of their region (about €25).
Accommodation prices are good value, when you consider that the hotels are often found in the heart of scenic areas, varying from €85 for a double room to €245 for a twin room (like in Granada). Two of the most beautiful paradors are in Léon andSantiago de Compostela.
There are some promotions available:
Over 60 year-olds can enjoy a discount.
Youngsters under 30 can visit the paradors at a fixed rate of €35 per person.
Two nights half board have a discount of 20%.
A dreamweek of 6 nights is cheaper.
5 nights at €42 per person.
The promotions do not always apply, especially in August they are not valid, and may require advance bookings.
Hostels
There are plenty of hostels, mostly in Madrid. Prices vary from €15 to €25 per night.
Xanascat. Is the Regional Network of Youth Hostels of Catalonia if you are visiting Barcelona, Girona, Taragona or other locations in the region.
Apartment rental
Short-term, self-catering apartment rental is an option for travellers who want to stay in one place for a week or more. Accommodations range from small apartments to villas.
The number of holiday rentals available depends on the area of Spain you are planning to visit. Although they are common in coastal areas, big capitals and other popular tourist cities, if you plan to visit small inland towns, you will find casas rurales more easily.
Camping
Camping is the least expensive lodging option.