It doesn't make sense from a business standpoint. Devoting the square footage to paying customers probably generates more revenue than allowing someone to take it up with a dog, although allowing dogs certainly generates good will.
A couple weeks ago I spent the weekend at the Hilton Hotel in Santa Clara. It's a comfortable place - I always enjoy staying. The one drawback is that there is an awful lot of sound leakage between guest rooms, but occupancy is low on weekends so it isn't a problem. They have started a weekend promotion, I think to attract families, where people are allowed to bring their dogs. All weekend long, I had to listen to dogs barking in the adjacent rooms. I emailed the GM and suggested that that promotion wasn't a good match for a property with such thin walls. She apologized for the inconvenience, but I'm probably done with that hotel. The Hyatt is right next door and costs about the same.