Among the familiar words from the Christmas story are these:
"And laid him in a manger because there was no space for them in the guest room" (Luke 2:7).
What happened to "no room in the inn"? Turns out, there may not have been an inn in Bethlehem after all, much less one that had no room for Mary and Joseph.
Luke, the only Gospel writer who provides an extensive nativity narrative, was concerned about precision in what he wrote. We know this because he said as much so very clearly (Luke 1:3). So if Luke strove for accuracy, it stands to reason that his readers should try to understand exactly what he intended.
Luke wrote that there was no space in the "katáluma." That Greek word is usually understood as a "guest room" in a house. Luke used "katáluma" in that exact sense later on (22:11) in reference to the "guest room" where the Last Supper would be observed.
These are the only two times that Luke uses that word. So, if "katáluma" means "guest room" in one verse, it should be translated the same way in another verse.
If Luke wanted to imply that there was an inn in Bethlehem that had no rooms to rent he would have likely used a different word: "pandócheon." That word refers to lodging used by travelers. We know Luke was familiar with that word because he used it in the parable of the Good Samaritan (10:34) in which the Samaritan took the wounded man to a "pandócheon." So Luke could have written "there was no space in the pandócheon" (inn) but instead he wrote "katáluma" (guest room).
So why do almost all English translations of Luke 2:7 refer to an "inn"? We need to go back about 500 years to William Tyndale, the first person to translate the New Testament into English from the Greek. Until Tyndale's time, the official Bible of the church was the Latin Vulgate.