Perhaps they're using the highlighted sections below (which the property alleges is not known until day of check-in)............

Upgrade Rewards
When using Points for a hotel stay, Members may need to redeem additional Points to reserve an "upgraded room," such as a suite or ocean view room. This “Upgrade Reward” may be required for certain room types in addition to a standard hotel Reward.
There are two types of Upgrade Rewards, "point upgrades" and "paid upgrades":
"Point" Upgrade Rewards: Point Upgrade Rewards, where Points are used to upgrade a standard hotel Reward, generally “cost” 5,000 Points each. Most upgraded rooms require one or two Point Upgrade Rewards per night, however, some hotels and resorts require three or more Point Upgrade Rewards per night, depending on the view or room type. Availability varies by hotel; check the details for your selected hotel when making a reservation.
"Paid" Upgrade Rewards: At select hotels, Members may pay for an upgrade to a standard Reward reservation on a cost per night basis. Upgrade Rewards price varies by hotel and will be charged to the room folio during the guest’s stay. Additional Points are not required with Paid Upgrade Rewards.
Upgrade Reward requirements vary by hotel/hotel category, room type and by season.
Upgrade Rewards may be used only when redeeming Rewards Points for a hotel stay. In most cases**, Upgrade Rewards cannot be used to upgrade a paid room.
** Based on hotel availability and Point balance, Members may choose to use Points at check-in to upgrade a paid room. Point Upgrade Rewards are 5,000 Points each and offered at hotels in the US (except Hawaii) and Canada only. Not applicable at Marriott Vacation Club and The Ritz-Carlton; cannot be reserved in advance.
5. Most upgraded rooms require only one or two Upgrade Rewards per night. However, some hotels and resorts require three or more Upgrade Rewards per night, depending on the view or room type.
6. Most resorts require upgrades for rooms with special views, such as ocean or bay view. Where available, 2-Bedroom Suites at Residence Inn by Marriott and TownePlace Suites by Marriott require the use of an Upgrade Reward. Marriott Vacation Club locations require Upgrade Rewards for 3-bedroom suites.
7. Some Upgrade Rewards require payment in local currency and cannot be purchased with Points. Check the Room Description when booking Rewards Redemption reservation online for currency and other redemption requirements.
8. Upgrade Rewards may be subject to availability restrictions.