Howliday Inn is narrated by Harold, a dog who lives with the Monroe family alongside Chester, a well-read and suspicious cat, and Bunnicula, a rabbit. When the Monroes prepare for an August vacation, Harold overhears the youngest son, Toby, arguing with Mrs. Monroe about leaving the pets behind. Mrs. Monroe explains there is no room and that Harold gets carsick. Bunnicula will stay at a neighbor's house, while Harold and Chester will be "boarded" at an animal hotel. Chester reacts with alarm, comparing boarding to prison. When the family loads the car, Chester resists his carrier so fiercely that the entire family must force him inside. Harold, by contrast, follows a chocolate cupcake into the station wagon. Mr. Monroe tells Harold that adventure is good for the soul and that their destination is Chateau Bow-Wow, a boarding house for cats and dogs. The radio announces heavy rain and thunderstorms for the rest of the week.
Chateau Bow-Wow sits alone on a hilltop, and Harold feels uneasy the moment he sees it. The family meets Harrison, a young employee, and Jill, a young woman studying to be a veterinarian. Dr. Greenbriar, the owner, assures the Monroes their pets will be well cared for while he takes some time off. Toby tearfully says goodbye, and Mrs. Monroe asks Harold to keep Chester out of trouble.
Inside the compound, "bungalows," the staff's word for cages, surround a grassy play area. Harold and Chester observe the other boarders: Max, a bulldog in a white turtleneck sweater, argues with Louise, a French poodle who accuses him of flirting with Georgette, a tiny French poodle with a Southern accent. Lyle, a wild-eyed, patchwork-colored cat who constantly escapes, drops to the ground before Harold's door and frantically whispers about breaking out together. That night, a terrible howl pierces the darkness. Chester declares there are werewolves and renames the place "Howliday Inn."
During exercise time the next day, Max explains that all the boarders know how to unlock their doors and sneak out after the staff goes home. He introduces Taxi, an odd-looking mutt who idolizes him. When Max complains about Louise's jealousy, Taxi mentions a television program in which a man poisoned his wife. Lyle pounces on Louise's back shouting military commands, and when she berates him, he growls a menacing warning. Harold also meets Howard and Heather, two wire-haired dachshunds who speak in tandem. They apologize for the howling and mention that Heather has not been feeling well. Chester declares them a cross between dachshunds and werewolves and warns Harold of an undercurrent of tension that will erupt with terrible force. That evening, Jill confides to Harold that exhaustion is making her careless.
The next morning, Harrison discovers Louise's bungalow is empty and the compound gate stands open. Jill realizes she accidentally left the gate unlocked when she ran back inside for towels. Harold suggests Louise ran away to punish Max, but Chester points out that Max's door was also open and that Louise's rumpled rug, uneaten food, and spilled water suggest foul play. Chester considers suspects: Max had motive and strength; Georgette could be his accomplice; Lyle threatened Louise directly; even Taxi could have poisoned her food to impress Max. Taxi overhears the conversation, glares at them, and walks away.
During a rainstorm, Chester convinces Harold to help him eavesdrop on Max and Georgette from the roof of Max's bungalow, but both tumble into a mud puddle when Harold loses his grip on Chester's legs. Chester reports hearing them discuss sticking together and escaping in the dark. Despite this, he insists the case is not solved because he was awake all night and never saw anyone cross the compound. His eyes light up, and he announces to the gathered animals that he knows who committed the murder. Max, prompted by Taxi, confronts Chester, accusing him of saying that Taxi killed Louise. Chester coolly denies the charge and promises to prove his case soon. Harold warns Chester he has made himself a target, but Chester dismisses the concern and tells Harold to stay awake because the murderer may strike again.
The next morning, Jill serves Harold's breakfast in tears. Chester's bungalow is completely empty, stripped of its rug and dishes. Harold eavesdrops at the office window and hears Harrison tell the sobbing Jill that he found poison near Chester's bungalow and that Chester's food tested positive. Harrison confirms Chester is gone. Harold, devastated, believes his best friend was murdered for knowing too much.
Determined to act, Harold questions the remaining animals but gets nowhere. After dinner, he notices that writing on the bottom of his food dish has been deliberately altered. Harold deciphers a new message: "Help Howls out now." That night, he concludes that "Howls" refers to Howard and Heather. A flash of lightning reveals two figures moving across the compound, and Harold finds Howard's and Heather's bungalows empty. Max's and Georgette's bungalows are also vacant. Only Harold, Taxi, and Lyle remain. Harold has a nightmare in which Chester's ghost accuses him of failing to solve the mystery. The kicking in his dream wakes him, and Chester is standing before him, alive.
Chester rouses Harold, then recruits Lyle and Taxi, telling them they must reach Howard and Heather before Harrison does. Harrison shouts that he has found them. He pulls a loose plank from the back fence, revealing Howard and Heather in the storage shed with newborn puppies. Chester orders the animals to attack, declaring Harrison the true culprit. Lyle leaps onto Harrison's shoulders, Taxi nips his ankles, and Harold barks. A car arrives, and Jill and Dr. Greenbriar rush in, followed by Max, Georgette, and Louise, very much alive. Jill explains she grew suspicious after Harrison sounded nervous during a phone call.
Chester later explains the full story. Harrison had overheard Dr. Greenbriar saying on the phone that certain animals were very valuable. Harrison schemed to kidnap whichever animal was most valuable. He first took Louise, wrapping her in a towel during the evening feeding so no one noticed, then left her door and the gate open to suggest she escaped due to Jill's carelessness. Finding Louise was not especially valuable, Harrison turned to Chester, whom Dr. Greenbriar had called "special." He drugged Chester's food and told Jill that rat poison from spilled garbage had contaminated it. Chester, held captive, tried to escape through a window but was caught, and he scratched the warning message onto Harold's food dish. While reading the animal files, Chester discovered that Heather was pregnant and due to deliver soon. When Jill called to remind Harrison about the valuable puppies, Harrison ran to seize them, and Chester followed to wake Harold. Taxi clears up the remaining mystery: Max and Georgette were planning to search for Louise because Max felt responsible for her disappearance.
A judge sentences Harrison to a year of college, paid for by working at the zoo. The Monroe family returns, and Toby and his brother Pete reveal a surprise: One of Howard and Heather's puppies, the runt of the litter, will join the Monroe household. Pete has named the puppy Howie, after his father Howard. Howie looks into Harold's and Chester's eyes and lets out a tiny howl, and Chester faints. In the Epilogue, Harold describes autumn at home with Howie, who now lives with the family. Chester attempts to teach the puppy to meditate, but Howie keeps turning "Ommmm" into a howl. Harold reflects that adventure is good for the soul, but what he likes best about adventures is that they come to an end. There is no place like home.