I think this is a bad policy, but it's already existed for years at 2 properties I know of: Sheraton Hong Kong and Sheraton Park Tower in London. Neither of these hotels will upgrade a Plat to the Towers section (in HK) or the Butler floor (Park Tower). I know there's been availability in both, but I have consistently been refused this upgrade.
William, looking forward to reading your response in this, and whether the 2 hotels above are allowed this refusal as well.