I don't agree. They might hold back tickets to sell through their reseller partners but these will be listed as genuine hospitality tickets and they normally have City's badge on the advert, well, they do on viagogo.
They could operate a hospitality package quite easily because to guarantee a refund for 12 of the 19 home matches, season ticket holders must have listed their tickets to be exchanged no later than 10 days before the fixture. The off site upscale restaurant is usually Tast or at least it was last season so that's quite a convenient, easy package to negotiate isn't it?