I just returned from Madrid last week and I had a difficult time finding reasonably priced hostals. Seems they were all booked weeks before. Your idea of booking Madrid is a good idea. I did too. I stayed at Hostel Chelo in Madrid. Antonio, the son speaks excellent English and was a great help. Very kind family, but best of all it was centrally located, and 2 blocks to metro. Before Madrid I was in Barcelona and that city is much more expensive. I paid way more money and didn't even have a bathroom in the room. I looked for a week on the net before finding Hostal Levante. Again excellent location, near Ramblas. Everybody in this world either uses Lonely Planet, Let's go, etc. and all the reasonable places are gone in advance. So if you know where you'll be, book in advance. Only problem is, if you are asked for a credit card, and don't show, they'll charge you for the first night. If you are going to touristy cities, then the cheap places will be gone, so you'll have to go further out I guess or if price is no object, then you shouldn't have a problem. I usually never book in advance in low season, but it's getting towards high season now, so have a backup plan available. Good luck