Good news - I got a response from Travelocity.

Bad news - it seemed to say nothing more than "ulp, this might be an issue, we need more time to investigate" which is not what I expected. Also, it seems a bit strange that they asked me to show them what the rate was, when they have it in their own computers and I provided them with the reservation number!

Still, I will wait for further details before making any rash statements or doing anything foolish. Watch this space.

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The email I got said:

Thank you for writing to Travelocity.

We are sorry for the inconvenience that was caused to you with regards
to your Hotel reservation.

Please provide us with the link where you see the hotel fare displayed
at $1, so that we may forward it to the concern department to look into
this. As your email requires further research.

We appreciate your patience and co-operation in this regard.

Regards,

XXX
Travelocity Customer Service