That means the hotel is renting out the meeting room for £0 as a loss leader, expecting to recover the costs from inflated room prices.
I play Go rather than Chess, but Go tournaments tend to pay for meeting rooms at full price, covered by the mandatory entry fees, and make a deal with the hotel to offer rooms to the players at non-inflated (i.e., group discount) prices, as goodwill in exchange for renting out the meeting room. The British Go Association insures tournaments against losses, so in the unlikely event that not enough players enter to cover the room cost (which rarely happens for tournaments that aren't just for a single day), the (volunteer) organisers aren't out of pocket themselves.
Loss leaders often seem to produce these strange results. Why don't businesses just set prices in a way that reflects the costs of providing things?