Hotels in Xilitla run the gamut. Some are artsy-fartsy and appeal to the university art professors and artistic people from they USA and San Miguel de Allende - who can afford them. Others are just hotels and some are nice little places run by good people with grand spirits.
There is a hotel at the junction of MEX-85 and MEX-120 where you turn right (west) to Xilitla. There are a couple of reasonably-priced hotels in town and one ridiculously expensive, snobby hotel. If you are lucky, you will be approached by a young man at the parking area who can show you a small B&B that is very inexpensive.
Casa James Xilitla or Posada James - clients of mine stayed here and liked it. B&B run by local family. https://www.facebook.com/casa.james.xilitla PH: 489-365-0367.
5 rooms. Pets OK. They are just past entrance to Las Pozas, on the road to Las Pozas (on left) with a little sign. Restaurant web page: http://www.letseat.at/casajamesxilitla/menu Yessi Guillen, Reservaciones, cel. 489 1097335, tel. 489 365 0367, de 8:00 a.m. a 3:00 p.m. casajames AT me.com. Their web site.
A trip plan customer sent back this review of a good hotel choice in Xilitla.
"The guide we had at Las Pozas today (Miguel) was the son of the cook for Edward James. He remembers James (he was 10 when James died) and could tell us stories about him. It was 200p for a tour from him and it was well worth it. Afterward, he told us to continue up the road that goes past Las Pozas on into Xilitla. If was a pretty rough stretch; all but the lowest slung cars can make it, though. Once the road turns back to asphalt immediately on the right is his mother’s restaurant called Las Cascadas de la Cebolla. Food was excellent and well priced. Right next door they also have a hotel with rooms starting at 300p. Nice place, new and clean. Only a 10 minute walk to the Plaza, without all the parking problems. Miguel’s sister runs the place and both she and Miguel speak English. (I am still surprised when I run into English speakers out here in the middle of nowhere.)."
Hostal Cafe - reasonably-priced, nicely decorated. Parking. Friendly. I would stay here. Calle Niños Heroes #116, ten minutes from the center on the highway to Jalpan (14 KM from Xilitla), after the village of Huichihuayán. . PH: 01-489-365-0018. Cell: 489-104-9082. Email: hostaldelcafe AT gmail.com and AT hotmail.com.
Posada El Castillo - upper-price (around $60-$110) downtown hotel, owned by the Plutarco family. It is an historic hotel and good from that standpoint. But check the rooms first and see if you like them before checking in. No parking, but a garage a block or so away. Melchor Ocampo #105 Centro. Hotel is to the left of the town square. They absolutely will NOT take pets.
There are a slew of hotels in Xilitla, in all price ranges. Rather than list them all, i recommend you go to the Booking.com link above and see for yourself. Be aware that the least expensive ones will not be listed. But I have had good luck with Booking.