There is no clear answer or dividing line regarding when a hotel expense is a necessary expenses, which an employer is required by law to reimburse an employee for in California.
The requirement to reimburse private sector employees for their expenses in California (which cannot be contactually waived, see Edwards v. Arthur Anderson LLP, 44 Cal. 4th 937, 951 (2008)) arises under California Labor Code § 2802. It requires employers to reimburse employees, “for all necessary expenditures or losses incurred by the employee” when working including include all reasonable costs.
In a lawsuit to enforce this right, an employee must prove that:
They incurred necessary expenditures;
While in the discharge of their job duties;
The employer knew or had reason to know of the expenditures; and,
The employer did not exercise due diligence towards reimbursement.
See Cochran v. Schwan’s Home Services, Inc., 228 Cal. App. 4th 1137 (2014).
This requirement is very general, isn't subject to detailed regulations, and also doesn't have all that much case law interpreting it. There are perhaps a dozen kinds of expenses that are governed by clear and controlling case law. But, gray area hotel expenses are not among them (and in the case of hotel expenses, "necessary" would involve both an evaluation of the need for lodging, and an evaluation of how lavish a hotel to determine if a hotel that nice was "necessary", which basically means applying a reasonableness test).
In practice, gray areas are as common as fact patterns in which there is total clarity under California Labor Code § 2802.
This statutory requirement largely restates (somewhat more forcefully) a common law principle of agency law, so the general body of common law agency law including non-California cases provides some guidance that is persuasive, rather than controlling, as do precedents concerning what can be treated as a reimbursable for tax purposes. Since neither of those main bodies of persuasive authority apply the same legal standard as the California statute, however, these cases have only limited usefulness.
Also, while the requirement can't be waived, a reasonable mutual agreement of the employer and employee as to what is and is not a necessary and reimbursable expense, or a reasonable policy imposed by the employer to set standard, while not controlling in a court case to enforce the right, would be given great weight.
What is reasonable and reimbursable is determined as a matter of law only if there is a dispute that is litigated after the fact, on a case by case basis, using the legal standards set forth above, by the jury, in a jury trial, and the judge, in a bench trial, in light of all of the admissible evidence presented at trial.
Whether an expense is "necessary" is a question of fact for the judge or jury at trial as the case may be, although entirely clear fact patterns could be resolved by a judge as a matter of law prior to trial (e.g. buying lotto tickets would usually not be a necessary business expense absent very weird circumstances).
On appeal a trial court decision regarding whether a hotel expense would count as a "necessary expense" would be reviewed on an "abuse of discretion" standard if there was any evidence in the record supporting its necessity. It is possible, in theory, that opposite decisions on a particular expense in factually identical circumstances could both be properly upheld on appeal, in a "close call" fact pattern.