I'm with the others on this. (i.e. it sounds as if the school is trying to offer a solution while, at the same time,meeting their legal obligations in respect of the welfare of the child).
However I'll just add a relevant note from my own experiences of running residential school trips:
Whenever I organised such trips, I always had a policy of taking at least one parent with us. (Most of the trips were football or cricket tours, and I'd invite at least one of the dads, who regularly supported the teams, to join us). However I was fully aware that the child(ren) of that parent would definitely NOT want to be seen to be 'tied to Dad's apron strings'). There was no way that I would consider putting parent and son into the same room. Dad joined the staff in our room/dormitory and their son(s) joined their mates in their own accommodation.
If your S-I-L (or another responsible relative) can accompany the group, I'm sure that the school would do everything possible to make sure that your niece had an 'independent' experience.
Chris