I may have misunderstood the process - but afaik there is a seperate booking and redemption process. So you book the hotel. You buy nights at a certain category seperately. You then use the nights you've bought against a hotel of matching or lesser category. The hotel and chain have the right to vary categories of hotels. Which means there isn't a contract for a certain number of nights at the hotel chosen - only the category of hotel subject to availability - if you get my drift. I think it unlikely there's much you can do other than ask for a goodwill gesture but I guess you'll be lucky.
I think this is how I understand it too. When you redeem the travel package, you specify what cat you want. If the hotel you want to book is raised to a higher cat, you are out of luck, unless you have already made the booking for that particular hotel.
I intended to use one of the travel packages for a cat 6 hotel, but I haven't booked it yet as I'm unsure of dates. I have booked a cat 7 package, just in case the hotel is upgraded to cat 7. It also allows flexibility - I can change my mind and book a cat 7 hotel instead. But if I originally reserved a cat 6, I would be stuck with a hotel that is cat 6 and below.