discount for cash in some hotels

No, they want currency. You'll have to get cash from an ATM. They want cash so that they don't have to pay the 2-3% service fee charged to them by Visa/MC.

And the smaller B&B places often want cash so they can do the transaction off the books and not pay any taxes. Welcome to Italy! :-)

Come on Michael, I know that is a common comment, but lets trust our Italian brothers -- at least a little bit. Most hotels will give 5% and a few a little extra with the book.

We have shifted to cash for nearly all of our hotels. On our last 33 day trip we only used a credit card when they would not give a discount for cash. One thing I would caution is to make absolutely certain you obtain a receipt when paying cash. Most of the time that is automatic but it can be overlooked. One time in Rome I forget to get the receipt but remembered as soon as we were in the room. Went back, got the receipt, no problem. We were staying four night. On third day when picking up our key the desk clerk asked when we planned to pay our bill. I handed him the receipt, he seemed confused, but make a copy. A couple hours later he indicated that everything was OK. But I always wondered if there was something else going on. In nearly a year of travel all over Europe never had a similar problem or question. But I still and wonder and make double sure I have that receipt when paying cash.

Thank you for clearing the fog!

One other thing about receipts. You are required to be given a receipt for everything that you pay for in Italy. You can be stopped by the "Guardia di Finanza" tax police and asked to show your receipt upon exiting a business. They are looking for businesses who are cheats and do things "off the books". So don't be surprised if you are stopped (not likely) and asked to show a receipt for a purchase, etc. It used to be that you could be fined too for not having a receipt, but I think this is no longer the case. Once you are 100 meters from the business, you can do what you want with the receipt.