Don Henley decided on the theme of "Hotel California", noting how The Beverly Hills Hotel had become a literal and symbolic focal point of their lives at that time. Henley said of their personal and professional experience in LA: "We were getting an extensive education, in life, in love, in business.
Beverly Hills was still a mythical place to us. In that sense it became something of a symbol, and the 'Hotel' the locus of all that LA had come to mean for us. In a sentence, I'd sum it up as the end of the innocence, round one."
Frey came up with a cinematic scenario of a person who, tired from driving a long distance in a desert, saw a place for a rest and pulled in for the night, but entered "a weird world peopled by freaky characters", and became "quickly spooked by the claustrophobic feeling of being caught in a disturbing web from which he may never escape."
In an interview with Cameron Crowe, Frey said that he and Henley wanted the song "to open like an episode of the Twilight Zone", and added: "We take this guy and make him like a character in The Magus, where every time he walks through a door there's a new version of reality. We wanted to write a song just like it was a movie."
Frey described the song in an interview with NBC's Bob Costas as a cinematic montage "just one shot to the next ... a picture of a guy on the highway, a picture of the hotel, the guy walks in, the door opens, strange people." Frey continued: "We decided to create something strange, just to see if we could do it." Henley then wrote most of the lyrics based on Frey's idea, and sought inspiration for the writing by driving out into the desert as well as from films and theater.
Part of the lyrics, such as "Her mind is Tiffany-twisted, she got the Mercedes bends / She got a lot of pretty pretty boys she calls friends", are based on Henley's break-up with his girlfriend Loree Rodkin. According to Frey's liner notes for The Very Best Of, the use of the word "steely" in the lyric, "They stab it with their steely knives, but they just can't kill the beast," was a playful nod to the band Steely Dan, who had included the lyric "Turn up the Eagles, the neighbors are listening" in their song "Everything You Did".
Frey had also said that the writing of the song was inspired by the boldness of Steely Dan's lyrics and its willingness to go "out there", and thought that the song they wrote had "achieved perfect ambiguity."