Complete Speculation: I say the hotel probably was legitimately full but the people working at the Front Desk were not properly trained on how to shut down reservations through the website/Central Reservations agents.

In the chains I worked, there was a phone number to call where someone who help hotels with questions about technical issues. I'd guess that Hilton has a similar set-up. But, if the Front Desk weren't trained on how to shut down reservations, they probably weren't trained that they could call and get help.

If the above is what happened, the Front Desk (who might have been just one person) had probably called the Front Office Manager but didn't reach them. In the meantime, they were improvising.