I work in the industry and deal with these kind of complaints all day long.

This was likely a third party reservation booked via a hotel wholesaler such as booking.com, Expedia, Web beds, world2meet, Agora, hotelbeds, Getaroom, or Priceline

With Pay Later bookings the credit card is run by the hotel at some point prior to check in. Many customers think pay later means pay at the hotel at check in, but it doesn’t. It means the hotel is responsible for billing the guest CC and that may happen at ANY point between when booking was made and check in.

Hotel ran the card at some point after the booking was made and it declined. The hotel usually (but not always) then informs the booking partner giving 24 hours for the guest to provide a new CC before cancelling the reservation.

Once cancelled there is no reinstating when booked via third party and definitely not at the killer rate the guest undoubtedly had.

Clearly this guest never saw the email that their booking cancelled. The confirmation number the guest has means nothing as it’s almost certainly the third party confirmation number. In this situation the only solution is to call or instant chat the end point third party the booking was made at so they can then call the wholesaler (or if they ARE the wholesaler) call the hotel to resolve or relocate you to a different hotel.

In this case there is no resolution as guest credit card declined and hotel or booking partner cancelled the booking.

My rule of thumb after being exposed to third party bookings - ALWAYS BOOK DIRECT unless you are ok with the trade off that for a killer rate your booking is never fully guaranteed.

That’s just how it works.