Dynamic pricing is madness. At least that’s what Russell Pedley will tell you.
He booked two economy tickets on the same flight. One cost $110 more than the other — and the airline added a $50 fee when he inquired about the difference.
What caused the difference? One was booked through the United Airlines mobile app; the other through its website.
“Is it common for an airline’s app to show a better or at least a different price than their own website?” wonders Pedley, a retired publishing executive who lives in Chicago.
What’s the deal with dynamic pricing?
Most travelers assume that an airline will sell an economy ticket for the same price, no matter how you buy it. But airlines don’t just have different ticket prices. They’ve started to set fares dynamically, showing different customers different fares based on what they know about them and on market demand. It’s a tactic that’s almost as deceptive as promising a free ticket.
Joy Lu, an assistant professor of marketing at Carnegie Mellon University, says airlines are using sophisticated technology to determine how much a customer is willing to pay for a ticket. “To a traveler, that may seem like price discrimination,” she says.
It does to Pedley, who says he booked a flight for his wife through the mobile app. Then he used his desktop computer to log in to his United.com frequent flier account, which identified him as a silver-level frequent flier. His wife’s ticket cost $560; his cost $670. He decided to contact the airline.
“I ended up calling the 800 number for Silver Elite status customers and then was charged a $50 fee for booking by phone,” Pedley said. “If I have premier status why would I be charged a customer service fee?”
After finishing his reservation, Pedley complained to United in writing. The airline apologized and removed the $50 booking fee.
Are airlines showing different prices to passengers?
But the question remains: Are airlines showing different fares to passengers? United says it doesn’t change prices based on your platform. “If you’re looking at the United app and United.com at the same time, rates will always be consistent,” United spokesman Jonathan Guerin says. He says United may have had a limited number of lower fares available, which would have caused Pedley to see a higher price when he booked the second ticket.
Airlines have always had variable prices for seats. They range from heavily discounted coach tickets to sky-high, unrestricted first-class fares. But dynamic pricing takes the process a step further. It prices the tickets according to what the airline knows about you, including your ability to pay more — or less — for the ticket.
“As technology and data capabilities continue to allow more improved and targeted offerings, the ability to splash fares to elite members of the frequent flier programs or others is going to become more prevalent and a trend we should see more of in the near future,” says Chris Sabby, a director at CWT Solutions Group, a corporate travel agency.
PROS, one of the companies developing dynamic pricing technology for the travel industry, says this kind of pricing enables airlines to be more competitive. It might also save you money on some flights.
“It allows an airline to incorporate real-time market conditions, competitive perspectives, and customer attributes,” says Aditi Mehta, solutions strategy director for PROS. “For example, the price may increase in response to a surge in demand — or decrease in a market that has become more competitive.”
Consumer advocates aren’t impressed by dynamic pricing
Consumer advocates are not persuaded. “Personalized airline ticket pricing is unethical,” says Edward Hasbrouck, an advocate who specializes in travel issues. “If an airline figures out from your Facebook that your mother is dying on the other side of the country, should it be allowed to charge you $10,000 for a ticket to see her before she dies?”
Terrence Cimino, a travel agent from Omaha, Nebraska, also says personalized airfares make him uncomfortable. “I shudder at the thought that airlines now have the ability to offer different fares to different people based on any criteria they might choose,” he says. “I don’t trust any airline to do anything that is remotely consumer-friendly.”
Customers don’t see many benefits to dynamic pricing, at least not yet. Gail Clark, a former chief executive who lives in Savannah, Georgia, suspects that airlines use a form of dynamic pricing when she shops for airfares. “I check the fare, but don’t buy,” she says. “The next day, the ticket price is higher. I don’t buy, and the next day it’s even higher, so I buy.”
She asks, “Am I being paranoid?”
Maybe. Cheap fares sell out quickly, so waiting a day or two might result in higher fares without dynamic pricing. But if she uses a cellphone to find a fare one day and a laptop computer a few minutes later — and gets two dramatically different results — then that’s not paranoia. It’s probably dynamic pricing.
How to avoid dynamic pricing tricks
There are two strategies that can help you avoid dynamic pricing.
First, learn to use your browser’s “incognito” mode. It creates a private browser session that can foil the dynamic pricing technology (just make sure you don’t log in to your frequent flier account).
“The information stored in your browser helps the airline determine your demographic, geographical location, income and spending habits, to name a few,” says Philip Weiss, a digital nomad who specializes in technology. “So with this data, they can target customers with higher fares by assuming they are wealthy — or vice versa.”
Also, consider using a VPN (virtual private network), a more private way to connect to the Internet. That privacy can give you an edge when you’re shopping for airfares.
“If I select a U.S. IP [Internet Protocol] address, the airline website shows me a higher fare,” he says. “If I select a U.K. IP address, then the website shows a lower fare.”
But advocates like Hasbrouck say the best solution is for airlines to stop personalized pricing before it spreads. Technically, ticket rules already forbid the practice, he says. But the government doesn’t enforce these tariff rules.
“In an age when more information than ever that could be used to personalize prices is available to travel companies, tariff requirements are more essential than ever,” Hasbrouck says.