Question

Many companies, especially in the travel industry (airlines, hotels, and so on) have so-called loyalty programs offering members benefits that depend on the frequency of purchase, miles traveled, or amount of money spent among other measures. One example is upgrades to a better seat or to a better room, for the same price as a regular seat or regular room. Such upgrades are generally based on availability, meaning the hotel or airline does not believe it will sell the room or seat. What, if anything, does such an upgrade cost the hotel or airline? Would these costs show up in the accounting records? Explain.

Answer 1

Answer :

Any sort of redesigns made in light of accessibility of Opportunity Cost, also known as Alternative cost, it is the Value(not an advantage) of the decision as far as the best option while Making a decision. A decision should be made between a Several totally unrelated options; expecting the best decision is made, it is the "cost" incurred by not enjoying the benefit that would have been had by taking the second best available Decision.

Here the overhaul expect to be happen just when the Hotel or airline does not trust that it will Sell the room or seat. Consequently the Decision relies on occurring of the best alternative Choice .

These costs are not shown in books . However such calculation is vital in decision making for management purposes.