> If a hotel denies your booking for whatever reason, would you just stay in the lobby anyway?

The equivalent analogy would be: you paid for and were situated in your hotel room, when you receive notice from the hotel that they have overbooked their hotel and that hotel staff from another hotel need to stay in your room and you must evacuate your room immediately. When you refuse to do so, they have security slam your head into the bedframe, resulting in you breaking your teeth, and then leave you outside on the curb.