It would be fair to extend everyone's status for a year, but that alone won't get people back into their hotels quickly.
What might work better is Status+1 promo, where if you stay xx nights within xx days, you get bumped up a level. If I know I'm keeping Titanium another year, I'll be happy and will eventually start booking again. If I have a shot at a short cut to Ambassador, I'll be motivated to start booking faster and add a night to two to some trips. Same deal all the way through Silver. You'd have to come up with something else for current Ambassadors, of course.