The policy exists because I was once declined an extra vacation day by a company I worked at which meant I had to take a flight costing an additional $150. The extra day they got out of me in the office was my least productive day of all time.
Vacation time is still approved by a line manager and is occasionally still declined. Generally people act in the company's best interests but sometimes we have to give context on why we can't allow a holiday.
The policy gets tricky when people leave the business, because we have to have a formula to explain to them what the calculation is for their remaining holiday pay. We try to be generous here and not simply take the UK statutory minimum (iirc 28 days). One person asked for ∞ accrued vacation days to be paid back to them which gave us a fun conversation about the difference between "infinite" and "unlimited".