Also consider letting the program know as soon are you're certain you will be declining their interview invitation. It's courteous to the program and your fellow applicants as it allows time to offer the interview slot to somebody else. Cancelling a day or two before, while not as bad as just not showing up, still isn't ideal.
As far as the hotel room goes, yes. Same approach. They should be able to cancel the hotel room for you if they are taking care of the booking. Some places may ask you to cancel it.
Just communicate with them in a polite and respectful manner and everything will be fine.