I am a graduate student in city X and am currently interviewing for a company which is renowned for its frugality and its bare-bones approach to employee treatment. So far, I've had 2 telephone interviews which went really well; the job seems very interesting and the pay is awesome. They have invited me to their HQ for a final interview which I accepted. Today, I received an invitation to book my hotel and airfare using a pre-paid voucher. And here's my question: My brother lives right across the street from the hotel and I know that even if they give me a hotel room, I will live with him. Ordinarily, I wouldn't care. I would just get the room (& possibly even invite my brother over). But, given the frugality of the company, would it be in my interest to refuse the hotel and tell them that I'd rather live with my brother?
It has nothing to do with the frugality of the company. They are offering you their hospitality which you can either choose to accept or politely decline. If staying with your brother is a better option for you, simply let the company know that you are grateful for their offer for a hotel, and your brother/relative stays in the city, and you'd like to stay with him.
If the voucher is for a hotel + airfare, you could also ask them if they have a voucher that covers just the airfare. It's very likely that they will have an agreement with the hotel and/or the airline, and the company would have customized options of offering interviewees just the airfare or airfare + hotel stay or just a hotel stay. If they only have vouchers for hotel + airfare, then politely inform them first on phone and then with a short email (to have a written record, in case something goes wrong), that as per the phone conversation, you would not be using the hotel.
On the other hand, if the hotel provides a cab service to take you to the company, then that might be applicable only if you stay at the hotel. Whatever the case, you have to speak with the company and ask them the details.
I was similarly offered a cab pickup from my residence for an interview, which I politely declined because my home was just a few miles from the company. When I went for the interview, I overheard that candidates were invited from other cities too, and their to and fro air-tickets were booked by the company. These are minor costs for companies. Accepting or refusing these will have no impact/impression on your interview. Your technical skills matter much more.
"Refusing" a hotel seems so negative. Just call them and tell them you could live with your brother for the time of the interview and ask how to handle that. If they insist on the hotel (maybe because handling your exception costs them more than the hotel itself) that's cool. Book the room and use it. If they don't, you just saved them money, not bad for a first impression.
Make sure you mention your brother during the interview. Maybe during the mall talk when your host asks how your flight was or if you like the hotel. Having family in the town you want to move to is a big plus. Not knowing anyone in the new town is hard and the company can do very little in terms of job satisfaction if you decide you miss your friends and family. If you already have family there that's great. A brother might even mean you get new friends faster (compared to having say... your granny in town). It's a positive point, don't forget to mention it.