India's Bottom Tier Hotel Category - A Budget Breaking Fact

Everyone who travels to India always seems to rave about the fact that the country is incredibly cheap.  Cheap accommodations, cheap food, cheap transportation, you name it.  After arriving it is not uncommon for you to run into many travelers who have clearly lived here for years or return year after year purely because the costs are so economical.
While the costs in this country are incredibly affordable compared to most destinations we've ever visited, there is one hidden truth to it all: the luxury categories are shifted, and India is home to one style even lower than you'd expect. 
The downside to this is that because this new found tier exists, the style you may be used to staying in is often shifted one category higher when it comes to cost.
For those who are not prepared to drop their accommodation style, a higher nightly rate than what you're expecting may be in your future.
The Common Tier of Hotels Around the World

To really explain this phenomena, we need to outline our viewpoint based on a current structure for hotels you'd see elsewhere.
In many destinations, the most budget friendly accommodation tier is that of a hostel.  Shared dorms of moderately good quality offer the cheapest price for travelers looking to share their sleeping space with others.  After that you have the mix of private rooms in a hostel and budget hotels which offer the same pitfalls of quality range at relatively affordable rates for those willing to splurge a bit.  After that the hotel structure goes up to more moderately priced rooms all the way to 5-star resorts that can increase in cost to meet anyone's budget who is willing to pay.
Now lets look at those on a basic dollar sign scale relative to cost to assign some rough values to each.
Hostels - $
Private Hostels & Budget Hotels - $$
Standard Hotel - $$$
Luxury Hotel - $$$$
5-Star Resort - $$$$$
Although the actual dollar figure will change based on the country you're in, most destinations will fall into this relatively constant pattern.
In India, this scale changes completely.
Shifting the Scale in India

For Indian hotels, a few notable differences are present.
First off, hostels marketed to foreigners as we know it hardly even exist in the country, so looking for room sharing to save costs is almost never an option.  From there, two new room types become available and are what we like to call "Indian Guest Houses."  These are either incredibly basic (mostly for locals) and a slightly more upgraded accommodation you'll often see marketed for tourists.
The basic Indian guest house does not advertise and is likely the type of place you'd stumble upon of you just showed up.  Even in the more expensive southern cities these can be as cheap as a few hundred Rupees per night ($3-$5) and have questionable hot water, a squat toilet, and a ceiling fan if you're lucky.
Tourist Indian guest houses do advertise and are the places you'd find through booking sites online.  These may or may not have wifi, advertise hot water but may not actually have it, and sometimes even have A/C.  In fact, it is not too uncommon for these to advertise having it all and then not have anything just to get you to stay there! 
For price they may range anywhere from two to five times the cost of a basic guest house per night, but come with a quality that many travelers would deem, at a minimum, "acceptable".  The issue with these hotels is that if you travel in the busy season they are far likely to book up in advance, and their quality would be comparable to low-tier private room you'd find elsewhere.
The problem with these two categories is that your next step, a budget hotel, has now increased a tier of pricing over destinations you'd visit elsewhere in the world where they'd otherwise be the same as the above guesthouse.  So to jump to a budget hotel with A/C, wifi in some destinations (India is very far behind), a nice restroom, and often a TV, you're looking at increasing your budget another $5-$10 USD per night, or into the $$$ category on our dollar sign scale below.
Want an even nicer hotel?  Better increase your budget.  Prices only sky rocket from there as we show below:
Basic Indian Guest House - $
Tourist Indian Guest House - $$
Budget Hotel - $$$
Standard Hotel - $$$$
Luxury Hotel+ - $$$$$
For the above scales, keep in mind that prices are still relative to costs of all things in India.  A $$$ guest house is still affordable by western standards, and you can stay in incredibly nice hotels for rates lower than you would for a budget place elsewhere in the world.  This scale needs to be kept in mind based on a standard of Indian spending, where travelers can get by with as little as $1-$2/night in some places and the most expensive is still far under $100/night. 
For those who are more picky about where you sleep at night, or the amenities you require in a hotel (like us in needing wifi to run this site), your planned tier may quickly change like ours did.
How This Busts Your Budget
The problem with this whole situation is that if you plan your India budget in advance based on rates published in a guidebook, you're likely looking at the basic Indian guest house rate of just a few dollars a night.  Take it from the places we've walked into in Southern India, they are not worth a second glance.  The next tier of tourist oriented hotels booked on major sites can be acceptable, but can get quite annoying when you are sick and want nothing more than a quiet space and a hot shower (and get none of it).
If you value luxury a bit, you may end up bouncing up into one of the next two categories more than you anticipated, and your budget will be hit with rooms that may be $20, $30, or even $40 USD/night depending on your location (with Southern India being towards the higher end of this range).
This was troubling to us as we planned our India hotel prices based on the Tourist Indian Guest House rate ($$) we found in the booking sites online.  But after staying in a few, and getting both incredibly sick and screwed on wifi, we needed to kick our luxury up one tier to be in somewhat comfort during our convalescence.

So from there our $20/night budget for rooms (which admittedly was rather high on our own precaution for this), actually ended up being $30/night because of this accommodation shift!
While we are totally okay with this increase in spending for some of the nicer rooms and new destinations we got to see, in many cases (especially in Southern India) we didn't have a choice.  Our travels during Christmas and New Years meant many of the beach side destinations we wanted to see increased their rates significantly, and we'd be lying if we said we didn't spend $35/night for a bungalow in Goa just after Christmas, but ended up in an equally acceptable (but far more basic) room directly on the beach in Gokarna for $8/night on New Years - and we showed up on the day of for each of those because every place that had advanced booking was completely full.
In the end, all we can say is that for our own preferred travel style, every time we stayed in a lower tier category because of the cost we left disappointed far more than we would have in other places around the world.  We kept asking ourselves why we'd pay $16/night in a Tourist Indian Guest House with no A/C, a bad shower, and annoying hosts when we could stay in a Budget Hotel for $25/night in the same town and get it all?  Throw in the fact that we were sick and that $25/night room starts sounding mighty nice as the budget rooms continued to get worse from there.
For all those reading this post who are visiting India soon and planning their accommodation budgets, keep this phenomena in mind.  If you can settle for a reduced quality room in the name of saving money, then this shift will have no affect on your plans in India.  If you require a basic level of comfort, amenities like 24/7 hot water, or most crucial to us, wifi, then you'll likely find yourselves shifting up a spending tier to stay in the same style you've been used to in many other destinations around the world.
We did, and although it hit our budget a fair bit (a few hundred dollars- lots of money by Indian travel standards), we are glad we did it.  Our stay in India could have been far less rewarding if we hadn't.  For a country with polarized views as strong as this one, where travelers either love it or hate it, it is best not to take chances with the little things that could drastically impact your trip.
Author's Note:  This post is a generalization of the hotel types you'll see in India.  While we only discussed a few categories of hotels, there are far more that actually exist.  Other categories you may hear of are basic dorm rooms or YMCA facilities divided based on gender, rooms offered at religious institutions, and even rest rooms at train stations that include modest facilities.  We did not include these in this post as they are outside what typical foreign travelers use (instead mostly used by locals) but are often much cheaper than those featured in this article.