"¿El hotel está a la derecha o a la izquierda?"
Translation:Is the hotel to the right or to the left?
Might be because of the 'Is', I can't see anything else wrong with what you wrote, unless it wants you to drop the prepositions:
The hotel is right or left?
I tried "at" the right and it was marked wrong also. That should be accepted
"Is the hotel to the right or to the left?" was marked incorrect, even though that was exactly what was displayed as the correct answer