Here are The Traveling Professor's tips on luxury travel and still being on a budget:

Travel Off-Season or Shoulder Season:   This is the biggest money saver.  Luxury hotels need to fill those rooms when the big crowds aren't there.  It's also a better way to avoid the crowds.   Again, this is where the best lodging and transportation deals can be found.

Stay at a Newly Opened Luxury Hotel:  We just scored a fantastic deal at a super-luxe 5-star Lisbon hotel that is aggressively pricing rooms at this newly opened location for a deluxe room at about 110 euros per night.  These are not easy to find, but a great bargain when they can be found.

Stay Away from Major Cities:   Let's face it, cities like Rome and Florence are way over-priced but you can stay in absolutely lovely cities like Treviso and Padua for half the cost and have double the fun at better hotels.  This strategy holds up best in Italy, but can work for you in France and Spain as well.  But if you want to stay in a major city, see the tip below.

Use Points/Loyalty Awards:  If you got 'em, use 'em.   This strategy is best when you do indeed want to stay in major cities in the middle of all the action.

Go on a Small Group Tour:   Being in the travel business, The Traveling Professor has developed business relationships with hotels.  We get better deals than you do.  Sometimes MUCH better.  We can pass those savings onto you.  For instance we stay in a hotel in Sorrento on our small group tours to Italy at a price of about 50% below what the consumer can get.  And on top of it, we are first on the list to get upgraded.  So on our small group tours, and I am sure it is true with other tour operators too, you can get a deal that is much better than what you can do on your own.