The Free Tram Zone was in place before Skybus (a private company) ditched their hotel shuttle.
Since I am a local I did not use it, but often saw it of course. My impression was that the streets were congested(it is even worse now in MEL CBD tbh, but that is a whole other topic - thank you Mayor Capp). They had a limited pick up area iirc that was basically the CBD and possibly Crown/Southbank? Plus inly ran during main hours of the day.
No doubt cost cutfing to remove, but I genuonely reckon that the Melbourne CBD is actually pretty easy to both navigate and get around to most hotels by foot or tram. Now yes, with a few larger suitcases yes it could be difficult. Though probably easier (for a first timer or rare visitor) than say being dropped at Central in Sydney or Brisbane, or in Adelaide where the bus used to go (iirc Franklin St?). Adelaide at least is much like Melbourne CBD as in a big rectangle of sorts.
My point being that the hotel shuttle service connection to/,from Southern Cross was probably a PITA in some respects with the time taken to go just a few blocks perhaps, deal with bags etc.
It is a loss of convenience for sure - specially for international and new vusitors - though many may just be tempted to get an uber or cab anyway.
Really none of our main cities have truly convenient/simple airport-hotel services these days. In SYD/BNE/PER it's the train. Skybus tried and failed in BNE. ADL used to have one but I think it died I think(and iirc never had hotel drop off/pick up). I've nore recently used the public bus which is a straight shot from the city and stops at the airport. I think HBA has a skybus still? CNS seems an ever changing landscape of operators (last time I used I booked with one, who put me in another which charged more walk up.. so I saved weirdly but it was a bit confused) and OOL had its skybus die a few years back (but the PT servuce via the 777/760 busses are vastly improved with very good timings even into the evening and easy connection to the tram - it works and is cheap - but of course is not door to door)
So really MEL is not great, but it's not the worst setup in Oz imo.