It's up to each hotel. You will generally lose up to 7% of the value in a foreign country because they won't give you a great exchange rate.

In Hong Kong, one hotel (SkyCity) gave me a good rate (about 2% below the exchange rate), but another hotel (Renaissance Kowloon) gave me a very bad rate (7% below). At the latter I just paid with cash instead.

Some people say that they print out the exchange rate from the Marriott site (which is fair) and the hotels sometimes honor it. That didn't work for me, though.

I can understand hotels giving a poor rate on exchange of currency, because it's a hassle for them and they will sometimes get bad money. But this justification doesn't apply to gift cards (or premium pounds).