none of these

"returned" is what you want (to maintain the sequence of tenses).

If you're talking about next Christmas, it must be

has decided .... returns

You can't use conditionals or futures in adverbial clauses of time.

escoville, but what if all this happened last year?

@ candice

This is basically reported speech. What he said was: "I will stay in a hotel before I return home for Christmas". By the rules of reported speech, this becomes:

He decided that he would stay in a hotel before he returned home for Christmas.

You can substitute "He decided to stay" for the first half, but that makes no difference to the rest.

The problem can be (and is best, IMO) avoided of course, by saying "before returning".

I find all 3 sentences a bit cumbersome; why would you not resort to solving the problem (rather elegantly, if I may say so) by using the progressive?

He decided to stay in a hotel before returning home for Christmas

edit: and if I had read escoville's answer in its entirety, I could have saved myself the effort. :-)

@ dude

"returning" is a gerund, not a progressive here. Don't confuse the visitors.