There's a strong narrative there, of a country kid immigrating for the big city, the land of opportunity, and thinking he might find fortune there, only to struggle to find a job at all - it's an old, classic story, even if it's one that sometimes shares in… problematic ideas about the corruptive influence of the metropolitan city and the wholesome, healthy homogeneity of the rural 'heartland.' But also it's just something that actually happens to people!
It's a little interesting, because while FFVII was created in the middle of Japan's economic downturn, it actually pre-dates (by a few years) the issues Japan has had in the 2000s and 2010s with the hollowing out of its rural population, with all the young people going to the "big cities" (mostly Tokyo). The Japanese government had to try to enact various advertising campaigns extolling the virtues of countryside life.
In FFVII's case, you're probably right that it's just a common story element that's been around for a long time, but in the context of FFVII's social commentary, it's coincidentally prescient.
…You know, I have no idea what the protocol would be here in a real military. I feel like you wouldn't let one of your soldiers go off on his own just because he has local relatives? Then again, you also wouldn't book your soldiers into a hotel.
A hotel is actually one of the first considered options for the military when it comes to housing troops. The "luxury" aspect is irrelevant, since the primary concern is having some kind of common accommodation for a large number of people. Obviously the military isn't going to be paying for any extra amenities, but in terms of room and board, hotels usually have at least some kind of experience in housing large groups.
Of course, just as important is the logistics of transporting troops from where they're staying to the mission location. So if the military happens to have some convenient temporary barracks available that's right next to the mission, they'll use that instead of hotels.
Having said all that, this consideration is primarily for
large groups. The Shinra expedition to Nibelheim is literally four people, which is just a section (well, half-section; I think "fireteam" might fit?). The point of preventing soldiers from going off with their own accommodations is to make sure the commanders (from the overall exercise lead to the individual section commanders) know where
everyone is, and can call them up at a moment's notice. With just four people, this is not a difficult thing to do, so I can believe it's down to the discretion of the section commander (in this case Sephiroth) to allow a soldier to go bunk at their old home.
Which does add to the general idea of Sephiroth being just some guy, working for Shinra's military arm. He's fine with Cloud going off on his own to presumably catch up with his hometown friends, rather than sternly keeping everyone in prim military protocol.
This is Zangan, a martial arts teacher who travels the world and claims to have 128 students (an oddly specific number!) among whom, in this town, is Tifa. Oh! Tifa backstory! So that's why she punches so hard, she's literally this game's Sabin, complete with an old wandering kung fu teacher. Explains why she's punching (get it) in everybody's league with just her fists. Zangan is kind of a showoff, doing backflips over Cloud as he talks, and wears a cape. He says Tifa has 'good sense,' and will become a powerful fighter.
The first time I played through this, I remember feeling like it's
very possible for Tifa to be higher-level (and thus more competent) than the level 1 Cloud, alleged supersoldier.
Which kind of coloured my impression of Cloud going "it's too dangerous" when Tifa is assigned as their local guide. I was thinking Tifa can probably take care of herself far better than Cloud getting KOed by every monster on the mountain.
