Looking back, I think everyone watching (I know I did) totally saw this as a way to promote a couple of top tier guys in important matches but ultimatley put the belt back on Hogan, either going over Andre or DiBiase to do it. Of course, without the Internet leaking top secret behind the scenes info like Hogan wanting time off TV I has no idea Hulk wanted out for awhile, necessistating a new champ being crowned. McMahon wasnt ready to end Hulk's undefeated streak, at least via clean pinfall (he'd lost matches via Count-Out & DQ before, Andre's victory on the NBC Prime Time Special was a complete screw job) so the tournament was created as a way to get Hogan out of the title picture and crown a new champ but crown him in dominating, impressive fashion without going over Hogan. They did a similair thing in 1992 when they were toying with the idea of Hogan-Flair by having Flair win the title in The Royal Rumble, wrestling over an hour, basically beating the whole company, but not pinning Hogan in the middle of the ring, about as impressive a win as he could get without cleanly taking out Hogan in mid ring, leaving some mystique if they did face off (a variety reasons, including Hogan's implication in the growing Federal Steroids Probe that nearly put Vince out of business, conspired to keep that match from happening at the time).
Was the tournament needed ? Id say yes - Otherwise you would have to explain how the top two contenders were achieved for the final match without Hogan being involved. This way you have Hogan on the show, pumping up event interest, and you have a way to protect him from a loss and still crown a new champ in impressive fashion. Savage's win was a landmark event in the company, and his career obviously, the ultimate reward for his hard work and dedication (and how often he made Hogan, Steamboat, and others look good). Hogan didnt really lose steam over it though, the unclear finish with Andre explained his elimination in believable fashion (unlike the twin refs scenario used to explain his earlier pinfall loss to Andre, one of the more creative but utterly ridiculous endings of all time) and did not hurt him or damage Savage's credibility as champ.