The Basement is located underneath the hotel.
It was first shown in "Charging into the Night", when Reef had an idea to use floodlights to surf at night. But the floodlights caused a power outage throughout the whole hotel, and so Lo, Reef, Fin and Broseph all had to go down to the basement to fix the circut breaker and bring electricity back to the hotel before Bummer and Kelly returned from their "date". Broseph then reveals that his uncle was an electrician, and he could fix a circut breaker.
It is also revealed that Reef is scared of the dark in this episode, and is afraid of vampires and monsters killing him. The basement also contains a meat freezer, where all the meat is hung. This freaks Reef out... a lot. When they finally come to the power room, the switches must be flicked in a certain order to make the power come back. The order is Green, Pink, Orange, Yellow, then Red. The power finally comes back on, just as Bummer and Kelly return.