Hotels, like airlines but generally to a lesser degree, oversell their hotels often. How it is handled here seems rather wrong and against established practice/policy. They may weasel their way out of it by blaming Covid but that is quite a stretch and should be shamed if they do so. I do suggest taking this up with the hotel manager in the morning and/or corporate (not just CS).

Here is one article about it when it comes to elites. https://loyaltylobby.com/2017/12/27/...-compensation/