I use hotwire maybe a few times a year and it has happened twice to me that the hotel they claimed was booked did not have the reservation. Most 3rd party booking sites don't have real time access to inventory, so if you book close to the same time that someone books direct, you can easily end up overbooked.

I think in the first case, they gave me a refund and I rebooked another through hotwire last minute. In the other case, the area was very booked up and I had to pay double to get a comparable room. So I had to send hotwire the invoice and they refunded the rate plus enough to cover the more expensive option. Both times was a huge inconvenience but that is sort of the price you pay for cheap 3rd party bookings.

They’re often not even cheaper these days (and are usually pay in advance with no or limited cancellations, vs booking direct usually being pay on site and cancel able to to a day or two out.

Yes, I have found that in many areas, you can match or beat the 3rd party price by going direct. Especially if you have any additional discounts like AAA. But quite a few highly competitive areas like las Vegas, you can save 25-50% by going with hotwire or Priceline.

This does happen, but rarely. Family boutique hotels should not overbook. It happens more frequently at business hotels, because those tend to offer no-fee cancellations, overbook and as a result never know how many people will actually show up for the night. So folks arriving very late can be hit with "sorry, we have no rooms available". Business hotels try hard not to do this often, but it does happen.

On the receiving side, this is not pleasant, but not the end of the world. On a business trip I can get a human travel agent on the phone who can find an available room and if it means a $100 taxi bill each way to get to a nearby town, so be it.