Sometimes I book with the hotel, sometimes with Expedia, Priceline etc. If I'm booking in Europe and not sure what might happen to the dollar (or know what will most likely happen) I try to prepay as much as possible. I'd rather have a good idea if it's a hotel in the city. If I'm booking with a small hotel it doesn't matter.

Another thing about directly contacting the hotel is you might get to "know" someone on staff before arriving. I always try to email the front desk and ask a few questions, let them know why I'm intersted in their hotel, can they recommend the best room within my price category, etc. I can't prove this is why it happens, but lately I've been upgraded room categories several times using this method. I email a nice thank you note after my stay, and post a good review for them on TA and Fodor's.