I would hope they'd treat it as a full-on walk - refund the cash+points and pay for the night at the Holiday Inn. Normally such a thing is handled very politely, with apologies all around and such. I think an additional handful of points might be in order because of the hour delay.
With all that said, I'm not optimistic that you'll get anything other than the refund of your cash+points. I had a bad experience at a Wyndham property some years back. Arguably not their fault (arguably!) and the only resolution was a refund - they didn't cover the alternate hotel.