Only you can really answer this tough question. On one hand, accommodation is by far the easiest way to save big money and cut major corners in your budget. On the other hand, what and where you decide to stay may be the biggest factor in determining your experience while in Europe. Also, and very important for some, is the fact that what much you spend on/for accommodation can often be the deciding factor for how long you can actually stay away from home on your holiday.
Many travel agents will answer this question automatically if you should decide upon their full service packaged tour. This may be the easiest way to decide, but it strips you of a lot of power of choice and flexibility. However, within these packaged tours most operators will offer a wide variety of tailored options to suit and cater to individual client needs. Although never forget, commissions and upselling are always a high priority.
At the other end of the spectrum you will find many who, instead of addressing the massive responsibility of deciding before you go, simply choose to “wing it” and figure it out when they get there. Basically, whatever your style, you will have to choose from one of the following which most suits your comfort level and budget. See www.accommodations.com as a good resource.
And on a lighter note, an interesting site worth checking out is www.sleepinginairports.net complete with up-to-date info on sleeping, safety issues, and services for over 1,500 international airports.