Yeah, that's it. And they are still justified in overbooking like an airline. They don't do this so they can bill twice for the same room. They do it because most of their bookings allow for cancellation up to 4-6pm the night of the booking, with no charge. If you cancel your room at 5:59pm, it's not too likely that someone else is going to reserve it or walk in looking for a room that night. So instead of taking zero for that room in such a case they have formulas just like the airlines that predict x number of cancellations will happen, so we can book in x number of extras.

So in the end it's very much like an airline, with similar (perhaps more annoying actually) inconveniences in the times like this when the math prediction is wrong and they have to walk someone.

What should still be "guaranteed" for you, though, is that if one room was left, you had a reservation but hadn't turned up yet, it was past the free cancellation time, and someone else walked in off the street with no reservation and wanted a room, that person would be turned away. In that case, you are correct. The room is already paid for. But if there's one room left and two reservations, and the other reservation gets there before you, well, you get walked.