I think the possibility of upgrades makes people madder than happier. But airlines love to sell everybody on the possibility of getting upgrader to first-class (dependent on availability, whether your flight is leaving on-time, where the sky is clear, whether the baggage crew has showed up on time that ).
And hotels are well.

They want to be able to use their leftovers for goodwill/rewards for loyal members.

I feel it is like salaries. There is no such thing as making everybody happy. There is only distributing it in such a way that most people aren't unhappy.