Yes, I understand that the laws can be different in different jurisdictions. (That's why I mentioned the location). And yes, the switch to the rack rate is what I'd expect hotels doing if they want to push out the overstaying customer during full occupancy.

That raises some logical questions/conclusions in my mind:
1. Did that manager switch to the rack rate? The hotel was not full. It's just they had no suites left.
I suspect the guest not leaving would indicate they probably that was not done. But probably my rate was lower than that guest's.

2. A few years ago, for the weekend of Formula-1 in Austin, TX, all hotels within 1 hour drive were booked solid 5 months ahead. And at that point, the few (2-3) hotels that still had a few rooms available were asking the rack rate (even though it seemed it could've been way over that). I remember something like Super-8 or RedRoof Inn asking way over $200 close to $300 for a simple room. At some point close to the event people were happy to pay even the rack rate.
So, the scheme to get that would be to arrive 1-2 days before the event, while the rooms are still available, and overstay. I wonder what would the hotel do in that case.
(Austin seems to have insufficient hotel capacity during such big events, so, I suspect that a similar situation happens annually during SXSW.)