Hilton pays the hotel two dollars for that free night exactly what it is worth
Just kidding

Let us not forget all how important these programs are to the hotels
Take that brand name off the property and let the property drop out of the program and see how much business that given property does at the end of the year.

Free night redemption is a great thing for the property for a number of reasons. Members who redeem are having a brand experience.A positive brand experience means the property has the potential to get repeat business.When the room perishes they get nothing and no word of mouth
No chance to upsell/ sell meals,movies and any possibility of other revenue streams
A satisfied program member who redeems statistically is far more likely to engage more frequently in the program and stay loyal to the brand as well.If the property performs they may have a loyal customer too

It can be a win win situation.
Finally let us not forget that everytime you pay for your room those miles and redemption points are built into the price of the room.You are paying for that free room no matter how you slice an dice it.Make no mistake about it even if you still believe in free lunches

Smart hotels with good busienss sense treat all guests well and elite guests with the recognition they deserve no matter if on points or revenue.I can personally say that is typically the case in almost everyone of my programs.That said there is always another property in foreclosure and IMO it isn't always the economy the easy blame