Dynamic Airfare: How Technology is Changing the Best Way to Shop for Flights

by Jessica Sommerfield · 2 comments

A recent article from Travel Weekly has created a lot of buzz about the future of airline ticket rates. In it, the project management director for PROS, a revenue management software provider, hinted that some larger airlines are on the brink of adopting technology that will charge each customer differently based on the virtual data it gathers about them — or at least their name-less profile. Smaller airlines have already been experimented with this type of platform on their own websites and sales channels.

It’s called dynamic pricing (or surge pricing, or micro-target pricing), and most airlines already practice it at some level. For example, carriers change class-based rates based on demand, peak travel times and holidays, and even when people book their flights (late booking is typical of business travelers).

But this newer version gets a little more intrusive and controversial (there’s even talk that the Federal Trade Commission (FTC) might get involved to examine its impact).

The way it works can be compared to the customer personalization (machine learning) software used on many retail websites, which identifies and tracks customers’ online activity then generates personalized advertisements and product suggestions for them. This is how Amazon knows what you’ve been looking at or what you’ve left in your cart.

Applied to airline ticketing, this technology would generate not only suggestions such as packages or upgrades, but individualized, real-time ticket prices based on a person’s profile (which might include their rewards card info), previous flight searches, rewards club memberbship, purchase history, and what their current search suggests about the kind of traveler they are (business, leisure, etc.).

What Dynamic Pricing Means for Airlines

Airlines thinking about pricing tickets this way would benefit in two ways — winning over new customers and making more money.

If an airline could identify someone who’s searching for a flight as a price-comparing, budget vacation traveler, it might want to offer them a lower price to win their business. On the other hand, the airline could charge a frequent-flying business traveler a slightly higher fare, and they probably wouldn’t notice (or care) since it’s being expensed by their company.

Basically, this approach to pricing could help airlines increase revenue without raising prices across the board.

dynamic pricing flightsWhat it Means for You — The Traveler

Dynamic pricing isn’t always beneficial for the traveler. If you’re a frugal, occasional flyer, you could benefit from better rates. But if you’re a business traveler — or if the system mistakenly profiles you as one based on your search activity — you could end up paying more than someone sitting next to you.

And this is only scratching the surface of how highly-individualized ticket pricing could affect the person searching for a good deal on a flight. Maybe you’re looking for something cheaper this time, but in the past you’ve been able or willing to pay higher prices. You could end up missing out on lower rates without even knowing it!

With this extra layer of complexity just around the corner, it’s probably a good time to re-evaluate our strategy for booking a flight. Here are four tips that take this new technology into consideration.

1. Get Rid of Cookies

We make it easy for these systems to learn more about us than we’d like, even without logging into an account — and the problem is our browser history. Invisible cookies leave a trail of where you’ve been online, what you’ve looked at, and who knows what else. Going to the browser menu and clearing your history before searching for a flight will help tremendously.

2. Use a Different Browser

Another tactic is to search for flights on a different browser than your usual go-to. There won’t be any history for these overly-intelligent systems to pick up, so you’ll look more like a “new” customer and a prime target for a lower rate.

3. Sort By Price — But Go to The Source

Sorting your search results by price is still a good idea, since the top results you see might not be the best deal. Be sure to factor in things like bag fees and other options, though — the cheapest airfare might not include some of the things you need.

It’s fine to use deal comparison sites, but be aware that some sites don’t reflect up-to-the-minute pricing, don’t list exact fares, and don’t always show every available flight for a particular date. You’ll find the most accurate information at the source — the airline’s website (which is where many of these aggregation sites ultimately lead you when you’ve made your final decision anyway).

4. Set Up Price Alerts

Setting up price alerts with various carriers will bring the right fare to your inbox. Not only is this more convenient, but — in theory — you’re less likely to fall victim to inaccurate or biased dynamic pricing software because you’re not roaming around online.

As technology continues to advance and touch every area of our lives, it’s important to understand how it can be used for — and against — our best financial interests. Even if it’s a long time before dynamic pricing becomes mainstream, it helps to be prepared and proactive in using the best strategies for shopping for flights — and everything else.

What do you think about airlines’ move toward dynamic pricing models and technology?

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  • The Poor Swiss says:

    Wow, I had no idea airline where going this far to price tickets. I’m well aware of machine learning and this is a very interesting application. I don’t think it’s a bad thing. They are just using the data they have available to make the best of it.

  • Troy Bombardia @ Bull Market says:

    This concept has been around for a while, but it’s only really starting to catch on. It’s based on the economic idea of a “different willingness to pay”. Just use incognito and I think it should be fine.

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