Combat sports are about picking the person apart, and winning, in whichever way possible. Hug fests as you call them, is actually called grappling, and no it does not happen 95% of the time, it's just not entertaining to watch to you because you do not understand the complexity of these situations. Aside from that If one cannot keep the other from "hugging" them, then they lack sufficient skill, and it is no surprise why one would "hug" the other if they can get away with a win this way. Strengths vs weakness, come prepared or lose. Money, status, and health are on the line. It's a job and if you don't win, you could lose a lot more than a +1 on your record.
Martial arts vary in their effectiveness, and what matters even more is the efficiency of the person practicing the martial art.
Movies are flashy. An example, acrobat can flip, twist, and swing their body all at once, which may look cool, but that does not mean they will know how to throw a proper strike, or know how to grapple. Their athleticism surely offers great potential in being an effective martial artist, but that alone will not win them any fights against someone who knows what they are doing, unless they are lucky.
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Don't you mind people grinnin' in your face