While there is an endless list of excuses as to why they took a reservation and did not have a car, I don't buy any of them since this reservation was made just a few hours before you went to pick up the car.

They knew they were overbooked, and apparently, they did not care.According to a story in USA Today a few years ago

If no cars are available at all, the location's staff should provide alternate transportation to your destination, such as a taxi ride to your hotel. The company should then deliver your vehicle as soon as possible. If that's not feasible, you can rent from a different agency, and if your new rental price is higher, the car rental company you originally booked with should reimburse you for the difference. This may require some negotiation, as technically the remuneration standard applies only to rentals of similar cars, and in a pinch, you might not have many choices.

I would try to get Hertz to cough up something other than a logo keychain or whatever trinket they send you.

It's also great that Priceline will take care of you.