It can be quite random.. I'd not expect too much, but I found the hotels to always be acceptable.

Had some decent experiences with Shenzhen Airlines free layover hotels in Shenzhen. 4* (Chinese category, but the beds were comfy and showers had good pressure and temperature) hotels, MUCH faster transport option than in the past, and more flexible on return-to-airport options. Y as *G, can't complain. Short layovers (just above 8hrs) both ways. Definitely not a bad way to get some hours of sleep.

All considering, it's a nice benefit to enjoy, and making their fares even more competive.