New Zealand Law
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This is legal, although obviously not very satisfactory. Fire safety issues like this apply to commercial premises, and generally to the exits outside the apartment. The fire and safety rules will be in the local bylaws of the local council and the conditions and number of persons permitted to stay is usually specified in the building permit, and in any council requirements for the Code Compliance Certificate.
You may have a stronger point under the Consumer Guaramtees Act where services, like holiday accomodation must be suitable for your needs, and if the cot takes up space which affects your enjoyment, then perhaps they should not advertise this as suitable for the cot as well as the adults. So you could claim a partial refund.