"Hot spots" happen when the skin is abraded (it can even be something as small as a tick bite that causes the skin to open). When the skin is abraded and it then gets wet from licking or swimming, etc, bacteria is introduced because of the moisture and this causes the hot spot.
The best thing for a hot spot or bacterial problems is to wash the area well with peroxide and then shave all the hair away from the sore. Hair traps moisture and you don't want that. Then dry the area completely and apply some neosporine ointment. Distract the dog for 5 minutes and then he can lick it.
If this doesn't help, you will need to see the vet to be sure it IS a hot spot and to get possible antibiotics.
I would also be concerned about ringworm. Ringworm IS contagious to people so be sure and wash hands well and see the vet for a diagnosis if you suspect this.
Let me know if you still have questions.