I think there's probably a big difference in what passengers are expecting between those flying on award tickets, and those on paid tickets. Those on paid tickets can probably afford (or the company can afford) an extra night for a room, someone to pick them up at the airport, etc. For award tickets, people in general are cheaper and may not want to spring for the extra night hotel room, etc. But of course TG isn't concerned that much with what the award travelers think. They're focus is on paying customers. So I suppose with regard to F travelers it does make some sense. But the arrivals lounge was also for C travelers, in which case I'd think more of them would be interested in an arrivals lounge.
Of course that's just my gut feeling and a big generalization. I'm sure some paying F passengers would still like the arrivals lounge, such as if they're arriving and heading straight out to a meeting, some would want a shower first. Or if heading out immediately would make them too early, they might want to stay around at the arrivals lounge first, catch up on emails, do a bit of work, etc. Checking into a hotel might not be practical if the hotel was out of the way from where their meeting was. Or perhaps they're not even going to stay in a hotel, but just go for a meeting and then leave the same day.
If money wasn't important, there's always the Novotel available, but an arrivals lounge would be more convenient I would think.