In case of cancellations, Virgin's Conditions of Carriage refer you to Article 9. From there you can see that 9.3 and its subsections apply. 184.108.40.206 indicates that passengers "may choose one of the following three remedies" in case of cancellation. One of the options includes re-routing at a later date (see 220.127.116.11(c). According to 18.104.22.168, if the re-routing means that the "reasonably expected time of departure of the new flight is at least the next day after the scheduled departure date of the cancelled flight," then passengers are entitled to assistance specified in Articles 22.214.171.124 and 126.96.36.199.
In my case, the re-routing changed my flight from December 19 to December 25--much longer than just the next day--meaning that I am entitled to the assistance in Articles 188.8.131.52 and 184.108.40.206, unless the airline reasonably expects that the "provision of such assistance would cause delay." A reasonable construction of the exception--which is used throughout the contract, including in situations of a mere delay rather than a cancellation--probably means that an airline might have the discretion to keep you at the airport if giving you assistance (i.e., hotel room, transportation to a hotel room, etc.) would cause a delay in getting you on your re-routed flight. Otherwise, the exception would swallow the rule, as some lawyers like to say.
I don't think it is reasonable to say that the expectation of a delay allows any airline to re-rout you, give you a new confirmed booking, and then later demand you take an earlier flight just because it's more convenient or cheaper for the airline. Once you and the airline have agreed to a confirmed booking to a date that is more than the next day, you have a new contract that requires the airline to get you out on those new agreed upon dates. Therefore, there would be no "delay" caused by a passenger unless staying in a hotel would cause the passenger to miss his upcoming re-routed flight. I imagine this might be an issue if an airline is stuck in the middle of nowhere, is waiting for a re-routed flight in two days, and the nearest hotel is two or more days away. In that case, it seems reasonable for the airline to require passengers to stay in the airport to ensure there is no delay. In my case, however, my hotel is 20 minutes from the airport, and there is little expectation of a delay by staying here.
So what do Articles 220.127.116.11 and 18.104.22.168 allow? 22.214.171.124 allows assistance of a "hotel accommodation if a stay of one or more nights, or a stay additional to that intended by you, becomes necessary." Basically, when the airline representative told me Virgin was only required to put me up for one night, he was wrong.
126.96.36.199 allows transport from the airport to the hotel. Other provisions allow two telephone calls or faxes or e-mails. (Remember, that's "or," not "and," but the restriction of "two" may only apply to phone calls. The language is unclear.)
So there we have it. Check your conditions of carriage online whenever you are stuck in a hotel and have questions about what your airline is required to provide you. Note: this posting is not intended to be legal advice. As always, you cannot rely on any statements made on this blog--my writings are merely my impressions as a layperson trying to navigate our crazy, unpredictable world. If you find something useful, that's wonderful; however, you must always do your own due diligence.