I was once in a similar position to your guest except that I was able to give the large hotel where we were booked several hours notice that we wouldn't make it as our flight was cancelled. Despite this the large Hotel didn't hesitate to advise that our airfare would not be refunded (and I don't think their occupancy was a consideration). Unlike your guest, I never threatened a bad review!
Personally, I don't think the industry can afford to succumb to such threats.