How to find low prices during travel’s dynamic pricing era
Thursday, August 29, 2019
Marriott is set to introduce dynamic pricing to its Bonvoy rewards program in the coming weeks. Effective in September, travelers will need to spend 14 to 33% more reward points in exchange for an award night when a hotel is busy.
Meanwhile, travelers may also receive a discount on an award night when a hotel has low occupancy.
Dynamic pricing is a common tactic in revenue management (also known as yield management), and allows service firms to respond to consumers’ fluctuating demand for the perishable inventory with a fixed capacity.
In other words, a service provider will increase the price when the demand goes up and lower the price when the demand goes down. Dynamic pricing turns out to be a very effective way to maximize a service firm’s revenue performance. It is hence not surprising to see more travel companies are now introducing dynamic pricing to their reward programs.
For most consumers, however, dynamic pricing often means they will have to pay a premium price for the service. Then, are there still ways for travelers to find low price when more travel companies are adopting the dynamic pricing strategy?
Finding low airfares
As an early adapter of yield management, the airline industry has been using dynamic pricing for decades. Consumers traveling in the same cabin, for example, are charged at different prices for an airline seat, depending on the time when the ticket is issued.
According to a CheapAir.com study, in which 917 million fares from about 3 million trips in 2018 were analyzed, the best time to purchase an air ticket is at about 70 days before departure, and the lowest fares could be found at about 54 days ahead. Travelers are highly encouraged to closely monitor the airfares between 121 and 21 days prior to the departure date.
I usually set up a price alert on Google Flights and Kayak as soon as I get a rough idea about my travel dates. I once booked a direct-flight, round-trip ticket between Tokyo and Los Angeles for about $350 on Delta Airlines and another round-trip ticket between Los Angeles and Paris for $400 on United Airlines ($280 if I would have chosen the basic economy ticket).
Besides adding dynamic pricing to its travel reward programs for mileage redemptions, airlines have also switched to fare-based frequent flyer programs. Such changes have made it more difficult for travelers to earn mileage on low-fare tickets and to redeem a free ticket.
Frequent travelers may consider using an airline’s credit card to earn mileages and book an award ticket as soon as they find out the travel dates. Most airlines still allow travelers to make changes on the award tickets for free or with just a small fee (at least, at this point).
Finding a reasonable price for hotels
Following the steps of airlines, hotels also actively use dynamic pricing to maximize their revenue performance. One essential difference between a hotel reservation and a confirmed airline ticket is the timeframe for free cancellation.
On the one hand, airlines typically only offer a 24-hour window for free modification or cancellation. On the other hand, hotels usually allow travelers to update or cancel a reservation for free if a request is made at least one day before the day of arrival.*
Travelers may want to “book early” and “book direct” as soon as they find out the travel dates in case the rates will be driven up by unexpected demand later. If they later change their travel plans, they can still modify or cancel the reservations for free unless such changes are made in the last minute.
Such a tactic will work well on both regular and award nights, especially now that the big hotel chains, including Marriott and IHG, are adding dynamic pricing to their rewards programs.
In the end, I remind travelers to be very careful with the prepaid rate because it usually means “nonrefundable” no matter what. Instead, travelers may be able to get 5 to 15% off the highest available rate with an AAA or a senior discount if at least one traveler in the party meets the criteria set by the hotel.
Dining out for less
The most common dynamic pricing strategy used in the restaurant industry are the specials offered during the happy hours. Similarly, some restaurants may charge for a premium price on the weekends or during dinner time; others may offer discounts during the weeks or for lunch. They are essentially the same tactic.
In the case of Bob Bob Ricard in London, the restaurant attaches different tags to the same menu items depending on the time and the day of a reservation. Consumers will pay less and can possibly enjoy a better and more relaxing dining experience when the restaurant is not as busy.
Finding a good deal on Airbnb
Dynamic pricing is also found in Airbnb and other home-sharing facilities because they are often perceived as a substitute for the traditional lodging product. The price of an Airbnb listing, however, is determined by the individual hosts who manage the facility.
Because not every host is a revenue pro, unlike those working in airlines or hotels, travelers might find it easier to identify a “good deal,” especially from those hosts with less experience.
Other ways to find low prices
Besides the above suggestions, being flexible is probably the key to save on travel. If your schedule allows, search for an alternate itinerary a few days before and after the ideal travel days. Staying in a hotel on a Sunday night can usually help save a lot because that is often the slowest day of the week for hotels.
Does dynamic pricing make it more challenging to plan a trip on a budget? What are your suggestions to save on travel?
*Please check the cancellation policy carefully for every reservation because the terms vary from one hotel to another and from time to time, even for the same hotel.
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