Organizing conferences is a major PITA; lots of work and little thanks. Maybe it is her job, but I still wouldn't go to a conference and flame the organizer unless something went much more wrong than running out of conference-rate rooms.
I don't know how it works for this conference or association, but usually the process is that somebody (organizer, exec director, committee of the association) picks the location, and then the assoc. negotiates with the hotel, getting the use of the conference rooms and guaranteeing a minimum number of room reservations. If the minimum is not met, the fees the hotel charges the assoc. can go up a lot. The assoc. may not be able to book out the entire hotel in advance without taking an irresponsible financial risk.
Why do associations pick expensive locations? It could be because the organizing committee wants to go there and drink mai tais by the pool, but also it's because they know that a conference in (for example) Santa Barbara will get more attendees than one in Galveston.
So you may be getting the shaft, but there are also reasons why these things happen. Don't complain too bitterly about the organization of a conference or you might be "invited" to help with the next one!
I second this. I flamed a conference organizer when I got my hotel room at the conference hotel basically for free when I booked through one of the big search engines. S/he took offense to this, pointing out why the conference rate was actually quite good, especially considering the dollar had depreciated against the foreign currency in question since it was negotiated. And there is no way a single conference can guarantee the number of bookings in a year that one of the big 3 will provide the hotel. I was persuaded by this and apologized profusely. I still may wind up having to help organize one of the future meetings, though, as part of my penance.