What was the nature of the downgrade and did you check online to see if your reserved category or some upgrades seemed to be available for sale? I would hope that a hotel would upgrade a customer whenever possible, even to the Presidential suite, before giving a downgrade, especially for an elite.

If the hotel routinely or regularly downgrades elite guests, then something is wrong. This should be a rare situation.

IMO you deserve more compensation than just the rate difference if you had booked the downgraded room at your same rate plan at the time you made the reservation. In extreme cases, such as the new room being unable to comfortably accommodate your party, the hotel should have offered to walk you to an equivalent or better nearby property.

You also should complain if the hotel tried to lie about the downgrade. I've had front desk agents tell me that I've been upgraded when actually it was a downgrade. I've also experienced some creative interpretations of which rooms categories constitute upgrades and downgrades, such as the person asserting that he likes the room more even though it costs $50 less (under the same rate plan, so the price difference isn't a matter of availability).