I would have allowed the extension at no additional charge - just move the three nights to the end. That seems to fly in the face of everyone else's opinion, but given all the circumstances - nine room nights, repeat customers, availability on Saturday that probably wouldn't get booked, cancelled flights - I would think that decision would be best overall for my business. Honestly, I would have not had any discussion with them about it, in private or in front of other guests.
Here's a story about the previous owner of our place: there was a long-standing relationship with a national business that had a distribution center here. The CEO stayed here, they did company meetings here, the whole nine yards. One December they had two rooms booked for five weeknights for two international employees. A big snowstorm came through and their flights were cancelled. She charged them per the cancellation policy - last minute cancellation, entire reservation charged. That business stopped completely for the rest of the time she was the owner. Let me tell you, business travelers here are few and far between who are not already committed to one of the chains under a government contract.
They came back after they heard a new owner had bought the Inn. The CEO tried us out, liked us, and we offered to work out a business policy with them. We kept their business until the owner sold it a couple of years ago and the distribution center was closed down.
Sometimes making an exception to your policy is good business, and that's why we own our own business - so WE can make those decisions..