Hotels.com bogus cancellation by Hotels.com Internet

My wife booked a room thru Hotels.com in June and had all the confirmation info. Two days before she was to use it, we got a phone message and an email from Hotels.com saying the hotel had cancelled her reservation. Before calling them, she called the hotel where the reservation was and they still had her reserved and gave her their confirmation number, She then called Hotels.com and they continued to tell her that the hotel had cancelled her reservation. When she told them that she had called the hotel and confirmed, they said that was impossible. SHe called the hotel back and confirmed a second time and the gentleman at the hotel told her again that the reservation was indeed in her name and he would see her on the appointed date.
Did they get a better offer?

Ted
Lima, Ohio
U.S.A.