EDIT: Well, on the other hand, I book hotels at Hotel.com, and if I cancel the day before, they can still charge me for the full stay. I did cancel the day of planned arrival a couple of years ago when the airline screwed my flights up too much, and they did charge me for four days I think - which I passed on to my Trip insurance which repaid me. They could have charged me for the whole week, but my Trip insurance would have covered that as well. One can even buy cheap Trip insurance from Hotels.com with the booking, but I buy more comprehensive insurance elsewhere.
I guess the problem is the hotel requires the deposit thru Paypal instead of credit cards, then charging the extra 4% on the Paypal payment.