If I had to guess, "free" nights are likely joined to paid nights. In other words, people have enough for ONE or TWO free nights, but buy the rest of the nights they need (vs. not buying any since they can't afford to without the free nights). Mine's a really simple example, but you get the gist - encouraging people to spend miles brings in incremental revenue that they'd never otherwise get, vs. the miles just building up or being transferred out so that SPG earns no revenue whatsoever.