In defining clauses (the ones without commas), both that and which are grammatically correct. In non-defining clauses (the ones with commas), only which is possible — that never appears after a comma.
Both sentences above are correct. They identify which hotel you mean.
Only which works here. The clause adds extra information about a hotel already identified by name.
American vs British preference
The grammar is the same on both sides of the Atlantic, but the habits differ.
American English strongly prefers that in defining clauses. Most US style guides treat which without commas as a stylistic error. The split is clean: that for defining, which for non-defining.
British English uses that and which interchangeably in defining clauses. A British newspaper might print the car which I bought or the car that I bought with equal ease. Neither version raises an eyebrow.
Both varieties agree on one point: that cannot appear in a non-defining clause. No dialect of English allows a comma before that in a relative clause.
When only "that" works
Certain structures require that. Using which in these positions sounds unnatural or is avoided by nearly all speakers.
After superlatives:
After all, every, any, no, the only, the first, the last:
After something, anything, nothing, everything:
In all these cases, that is the default choice. Omitting the pronoun entirely (the best meal I had ever tasted) is also natural and common.
When "that" cannot be used
Three situations block that entirely.
After a comma (non-defining clause). This is the core rule. A comma signals that the clause is extra information, and that does not introduce extra information.
After a preposition. When a preposition comes directly before the relative pronoun, only which is possible.
If the preposition moves to the end of the clause, that becomes available again: the chair that she sat on. This version is more common in everyday speech.
When referring to an entire clause. Sometimes which refers back to the whole previous statement, not to a single noun.
Here which means "and this fact". There is no single noun for that to attach to, so that does not work in this structure.
Who vs that for people
In defining clauses, both who and that are correct for people.
Some style guides prefer who for people and reserve that for things, but the use of that for people has a long history in English and is perfectly standard.
In non-defining clauses, use who — not that, not which — for people.
Common mistakes
Using "that" in non-defining clauses
Missing commas around non-defining clauses
Using "that" after a preposition
Using "which" where "that" is expected
Using "which" for people