Financial Decision Making for Managers

Hotels and airline companies often sell their rooms and seats at deep discounts on sites like www.priceline.com and www.hotwire.com. The prices for these hotel rooms and airline seats are often way below what the company needs to make to cover its costs.

1. Discuss why airline and hotel companies are willing to do this? (Think about the different types of costs as they apply to hotels and airlines when you present your reasoning.)

2. Airlines as well as hotel companies have their own websites where customers can buy seats or rooms. Why do you think they prefer to use Priceline or hotwire for the ‘deeply discounted’ product rather than their own website? (Note: This is not from the text and is really more of a marketing issue. But, it is always interesting to see the interrelatedness of the different branches of business – so use your marketing knowledge, personally savvy or imagination on this one!)