Here’s the answer from Adwords :
http://adwords.google.com/support/bin/answer.py?hl=en-il&answer=66292
If you have multiple identical keywords in your AdWords account, you may have noticed that these keywords have different impression and click statistics on their Ad Group Details page.

Despite the differing account statistics, identical keywords in the same AdWords account will all have the same Quality Score. This is true even if they use different match types.

Below you’ll find an explanation of how the AdWords system determines which keyword, when it’s one of multiple identical keywords, is allowed to trigger an ad and accrue an impression.

I. Multiple Identical Keywords With the Same Match Type

The keyword with the highest CPC bid will be allowed to trigger an ad.

If the keywords have the same CPC bids, then the system will pick one at random. Note: This assumes that none of the campaigns have already met their daily budget.

II. Multiple Identical Keywords With Different Match Types

The more restrictive match type will always trigger the ad, regardless of CPC bids. For instance, if the broad-matched keyword apple and the exact-matched keyword apple both existed in your account, the exact match would always trigger an ad.

Q2. Is the exact match actually cheaper or does Adwords just grab the highest bid for the phrase?

And if we are buying other hotel related phrases (hotel spa, hotel canada, inn spa), isn’t it all just redundant??
Q3: Wouldn’t it suffice to just buy one Broad match on Hotel Montreal and let Adwords pull out the synonyms?

I say ’suffice’, but Adwords is set up to run your account up to the maximum budget every day, so we really do care whether the clicks result in a phone call (service business, no online ordering).

I don’t have to tell anyone here how crazy this gets.
Thanks very much, nice work. If I answer my own question, I’ll post it here.

Which matching option would you suggest I start with when creating a new account? I clearly understand the difference between the 3 (broad, phrase and exact)

Let say I’m targeting the word “Hotel Montreal” what happen if I set up an Ad group for that keyword using the three matching options, would I be competing against myself? Will the exact match be less expensive per click than the phrase match?

Let say a user does a search on Google with “hotel montreal” as the trigger Word and that I’m bidding on that word using broad match and my competitor is bidding on the same word using exact match. Considering all things (quality score, landing page, bid price) being equal will the one using the exact match get a better position?

Thank you in advance for helping me with this.

By the way excellent blog… You folks at PPC hero do great job educating the world on PPC advertising. I have learned a lot since I started reading your blog. Kuddo’s to you guys.