Translation:Our hotel is by the sea.
According to Wiktionary at https://en.wiktionary.org/wiki/%E6%B5%B7%E9%82%8A#Chinese, "海邊" means "seaside, beach", so this sentence is literally "Our hotel is at the [beach/seaside]".
Given that, it seems reasonable to accept "Our hotel is [near/on] the beach." Both are rejected.
Exactly. That's many people's answer, and it is totally correct. Duo Birdie is a 菜鳥for sure!
海边 means a beach or a seaside/seashore... Therefore those who choose either must be counted as correct answers. There is nothing else to it.