Any explanation of Central London’s hotel districts can only talk in generalities. Local conditions and hotel rates can change in a very short distance.
Although Londoner’s love grumbling about their public transports it really is a major asset for the visitor. The frequency and coverage of the London Underground means that all the hotel districts are within 15 minutes of all the main London attractions. The London Underground is simple to use with trains running every 2-5 minutes from around 05:30 to 24:00 daily. Your hotel will normally be within 10 minutes walk of the nearest Underground station. When you book a hotel, do find out which and how far the nearest Underground Station is from the hotel.
London’s buses operate comprehensive night services when the Underground is closed, servicing all the hotel districts in the central area and there are of course London’s famous black taxi cabs. 

Kings Cross & Euston
Situated just north of Bloomsbury, this area is known best for its 3 mainline railway stations Euston, Kings Cross and St Pancras that service most of the UK north of London. All 3 stations are on a 1km stretch of the Euston Road.
This district is very close to the central visitor area with excellent public transport links (Kings Cross has no fewer than 6 Underground lines). Kings Cross has direct rail links to Luton and Gatwick Airports and a direct Underground link to Heathrow.
This area is thus for people looking for value for money accommodation, just 2 or 3 Underground stops from Oxford Street etc. There is little of interest in the area for visitors apart from the British Library. The British Museum is also within easy walking distance.
At Kings Cross there is a cluster of about 25 bed and breakfast hotels opposite the station. These offer some of the cheapest accommodations in London and in general are better quality than similarly priced hotels elsewhere in London.
At Euston, just a little west of Kings Cross there is a cluster of 3 and 4 star hotels. Again given the proximity to the central area many of these offer good competitive rates, especially at the weekend. Hotels range from travel lodge chain hotels Ibis and Premier Travel Inn to 4 stars like Hilton, Novotel and Thistle.

Kings Cross Hotel Map 

Paddington and Bayswater
This is a major hotel area with a high density of hotels. The area is on the northern border of Hyde Park & Kensington Gardens. Although there are exceptions, this area is dominated by budget and mid range hotels. Like the Kings Cross & Euston district above. Hotels here are very close to the very centre, only a couple of Underground stops, but enjoy much lower room rates than the very centre.
Paddington is dominated by the station, which is the London terminus for the Heathrow Express train to Heathrow. Like most mainline stations this is a very busy area with lot of people passing through. With the notable exception of the Paddington Hilton (part of the station) most of the hotels around the station are budget/cheap. Norfolk Square just opposite the station is lined with cheap B&B hotels of variable quality, the Cardiff Hotel being perhaps the best. Just south of Norfolk Square is Sussex Gardens, an avenue lined with small independent hotels. These can offer good value. Notable hotels are the Rhodes, Stylotel and Darlington Hyde Park.
Right by Hyde Park is Lancaster Gate with its own underground station. This is a very elegant area with hotels typically larger and more upmarket than immediately around Paddington Station.
About 1km west of Paddington is Bayswater, bordering Kensington Gardens. This area is more geared towards retaining the leisure visitor for evening entertainment, restaurants and shopping than Paddington. This area is one of the best areas for the budget traveller to stay. Queensway, the main High Street is lined with restaurants of all cuisines and budgets, together with two Underground Stations. The existence of a local community keeps prices realistic.  Bayswater has plenty of cheap and nasty hotels, basically you pay for what you get. Bayswater is one area where room rates are normally much cheaper during the week than at weekends. The following hotels are fine and often deep discount, especially during the week: Blakemore, Central Park and An Nur Hotels.
Bayswater Hotel Map
Paddington Hotel Map

Kensington covers a large area to the west of the city centre. Heathrow, London’s main and original airport is this side of London so Kensington grew up in this favoured position. With the emergence of London’s other main airports, Kensington is still ultra convenient for people using Heathrow but not so great if you’re using Gatwick, Luton and Stansted. Stansted and Luton are particularly difficult.
In crude terms, the further West you go in Kensington the cheaper the accommodation. Nearest the centre is Knightsbridge, home of Harrods. This is an expensive area for hotel accommodation. Travelling out you pass the museums at South Kensington.
The area around Gloucester Road Underground has a cluster of large mid range 3 and 4 star chain hotels including Holiday Inn (2), Radisson and Millenium.
Further West again is Earls Court, the budget district of Kensington. There are lots of ‘cheap and nasty’ independent hotels with hostel like standards here. Two budget chain hotels of note here are the Ibis and Premier Travel Innbase2stay is another excellent choice.
Earls Court, Gloucester Road, South Kensington and Knightsbridge are all on the Piccadilly Underground line, with trains to Heathrow every 5 minutes.  The whole area is pleasant enough, you can find local restaurants etc if you want but most people will decamp to the city centre in the evening and daytime.
There are several very large supermarkets in the Gloucester Road/Earls Court area not available in most other hotel districts where only convenience outlets are normal. Kensington is a major area for short let apartments in London.
Kensington Hotel Map