Rosesarered - firstly thank you for posting this question, as the thread shows just what a thorny topic this is and it highlights that as a society we are very judgemental of others and can have polar views.
It must have been a very uncomfortable situation for you whilst on holiday ,as I guess there would have been so much upset not just for the child, but for the parents and all the other adults as well.
The reality is whether facing a toddler temper tantrum who is refusing to eat his cereal and throwing food around or an insolent adolescent saying “ whatever” in a really disrespectful tone , every parent struggles to find the best way to discipline children. And most of us as parents fail at some point! We're often just not honest about it. Studies from Vanderbilt University show that most parents often used the same punishments that their own parents had used on them. Forty-five percent reported using time-outs, 42% said they removed privileges, 13 % percent reported yelling at their children and 9% percent said they used spanking “often or always.”Parents who resorted to yelling or spanking were far more likely to say their disciplinary approach was ineffective. Given that parents often don’t admit to yelling and spanking, the study probably underestimates how widespread the problem of ineffective discipline really is.
Most parents I find are floundering when it comes to positive discipline, and I like to see misbehaviour as a teachable opportunity involving meaningful relevant consequences and never the use of power or violence as in smacking. It just teaches children to abuse power and , children don’t respect adults who lose it and smack. It means in the moment we've lost it and are no longer in charge.
So ..... my thoughts are that you care deeply about your friend and her children and without judgement or blame or criticism, it is possible to have a tricky conversation with her sharing with her how the incident made you feel. Try using an " i " statement instead of "you" and you may be surprised at what the result of the conversation is. My guess is ( I may be wrong) she too may be feeling uncomfortable and embarrassed and that there may be very different parenting styles between her and her husband and she may want to talk about it.
Apologies for the length of my response but this is such an important area and one I find most parents really struggle with.
Hope that helps and good luck!