The Mango Inn is UDC’s hotel, generally the cheap rooms are pretty much like a hostel, and I would think for the festival it will probably be pretty rowdy. I don’t know much about Utila Lodge. I will be staying at the lighthouse. I stayed there for two weeks last summer and I really loved it. Thelma and her husband are really great, and although it is more expensive at ~$360 a week (for 2 people) it is clean, safe, extremely well kept and clean and they have their own backup generator, which is nice. The rooms have pretty comfy beds, nice bathrooms and you can flush the toilet paper, a/c, satellite tv and kitchenette (sink, dishes, fridge w/ freezer and microwave). It’s right near Alton’s and RJ’s just before the bridge.
The only other place I have stayed is Coral View. The accommodations are ok, but for the price difference I like Lighthouse much better accommodation-wise. Coral View has an awesome dive shop though, with great personalized service, and I would dive with them any day. The location is a bit more out of the way as they are at the far west end of the road past the public beach, a good 20-30 min walk from town (or a 5-8 minute tuk tuk ride, but they can charge more at night and in bad weather...). They also have great snorkelling from the pier, and you can use the kayaks to go through the mangroves to the north side, which is pretty fun.