Translation:He pays for the hotel.
If you want to say "The hotel pays" as in the hotel is paying for something, you would say "L'albergo paga". It's just like how you'd write it in English, "Lui paga l'albergo" has "lui" first, just like how "He pays the hotel" has "he" first; "L'albergo paga" has "l'albergo" (the hotel) first, so it would mean "The hotel pays". Am I explaining myself?
That is incorrect. “Paga l’albergo,” means both, “He/she pays the hotel,” and, “The hotel pays.” The word order only changes what question the sentence answers. “Paga l’albergo,” answers the question, “Who pays?” and “L’albergo paga,” answers the question, “What does the hotel do?”
I agree! I would most definitely translate that as something along the lines of "Did you pay for all this wine? We can't afford that!" - "Oh, relax! The hotel pays!" Or well, any other situation, but definitely "the hotel pays". Because if he is paying FOR something, he "paga per..." He could pay TO the hotel... like "he pays for the damage to the hotel" but... it's still weird, this question just shouldn't be in a multiple choice test with only one set answer.