After the end of the Cold War, there was a construction boom. This led to an oversupply of hotels and inexpensive rates. Berlin is becoming increasingly popular and the city continues to re-build itself and change, but prices remain low. Most of the hotels are still located in the West around Zoo station. The trendier East has a growing market, and offers more inexpensive, quality options.
Hotels range from 5-star, modern boutique hotels, to DDR kitsch. All major hotel chains are present in Berlin, as well as many fine independent establishments.
Berlin has the lowest average nightly hotel rate of all the major European cities. The average is estimated to be at 122 euro, but hotels can be found for as little as 40 euro a night.
It is also possible to rent your own space, either a room or an entire flat, very affordable. Subletting (untermeiten) is extremely common within the city and usually very affordable. If you are staying for just a night, or a longer period, subletting is a great option. Visitors must beware of scams and beware dealing in cash. Most situations are legitimate, but may people do not approve the sublet with their landlord, which is technically illegal. The EasyExpat article, "Hotel Alternatives", discusses the pros and cons and different companies.
A Bed & Breakfast can be an a refreshingly personal environment to explore a new city. Though a B&B may be more expensive then traditional hotels, occasionally they are cheaper then the surrounding locations given the inclusion of a meal and the luxury of the environment.
Pensions, inexpensive hotels, are often set-up within someone's home and usually include breakfast. These can be a great alternative to chain hotels, both in price and experience.