To my understanding, under that interpretation, the cloak is most valuable for long-range hiding, when the wearer is out of hearing range, and the DM rules the wearer can't be seen clearly despite not being in total cover or heavy obscurement. At that kind of range an invisible creature is automatically hidden, no check required, since they can't be seen or heard. A character wearing the cloak at a similar range isn't automatically hidden, but enjoys both advantage on their stealth check and imposes disadvantage on enemy perception.
This could potentially work at shorter ranges if there is enough background noise for the DM shorten the maximum hearing range.
Where this runs into difficulty is at tables where the DM either doesn't impose a range limit on hearing at all, or never rules that a character can't be seen clearly unless they are behind total cover or heavily obscured. At those tables, the second feature of the cloak really only helps with long-range hiding for Wood Elves and Skulkers.
There is one other benefit from the second feature of the cloak at some tables. If the DM rules that there is doubt over whether a non-hidden creature can be seen and calls for a perception check (e.g. noticing climbers on a mountain in LOS but at extreme range), the cloak would still provide disadvantage on that check. But not all tables allow for the possibility of non-hidden characters going unnoticed, and not all tables allow the DM to call for checks other than in response to action declarations.
Ultimately, the usefulness of the second feature of the cloak is entirely dependent on the particular DM, ranging from better than invisibility (at tables that don't limit the disadvantage to purely visual checks) to utterly worthless without being a Wood Elf or Skulker (at tables where the DM does limit the disadvantage to purely visual checks, doesn't impose a hearing distance limit, and always requires total cover/heavy obscurement to hide absent a special feature).
TLDR: unless you know your DM really well, always take Boots of Elvenkind over the Cloak of Elvenkind wherever you have a choice.