Isn't July in the slow season? What are the chances that this placing was turning down reservations because of this now cancelled booking? IE what are the chances that they even lost any actual revenue because of this?

I still say that if you feel that you were wronged, the first place that you call is the hotel to try and reach some sort of an agreement. If the doesn't work, the second place to call is your credit card company.

I guess this is another reason to travel during the slow season and to not make any reservations...