I think it's mostly about the workforce supply flexibility. Agency workers are paid more than the regular staff at the same position and there is the agency fee on top of the hourly rate.

We were also called "candidate" as if we are permanent job candidates. That was actually true for some people who actually persued jobs in the hospitality industry and when someone gets a permanent job the employer pays the agency a fee.

Yup. It's interesting. On the one hand, they could have an employee with impeccable skills, background, training, etc, but have to pay them well, guarantee benefits, hours, etc.

Or they can outsource the contract to a 3rd party, let that company deal with coming up with hired guns, liability, etc, and just hope it all works out. And if it doesn't, it's a lot easier to fire a contract company and find a new one, than to fire actual employees.