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We recommend getting an Airbnb in San Lorenzo de El Escorial or in El Escorial for Thursday night and Friday night. That way you will be close to the wedding venue and can take the bus service we will provide. Plus the towns are charming with plenty of great bars and restaurants.
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(For nights in Madrid) If you would like a less expensive option than a hotel, this hostel got a perfect 10 rating on hostelworld.com, and it's located in the heart of Madrid. They have rooms that accommodate up to 6 people in case you are travelling with friends
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If you have Marriott Reward points, this is a great place to stay while your in Madrid. Any other AC Marriott in Madrid is great, but this one is closest to the city center.
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If you have Hilton Rewards points, this is a great option for staying in Madrid. The only other Hilton is by the airport, which is far from the city center so we do not recommend it.