Traveler: How much to fly to New York next week?
Airline: It depends on who you are.
Hmmmm. Decades ago, the price of an airline seat was simple: Economy class had one price and first class had another, and they didn’t change until the flight sold out. Everyone paid the same fare.
But after the airlines were deregulated in 1978 and they increasingly turned to computer power, fares became much more fluid. With sophisticated “yield management” software, airlines could offer multiple levels of fares, and offer more or fewer seats at the various price points depending on ongoing changes in seat availability and passenger demand as a flight booked up.
Just ask anyone who found a great fare online, but when they tried to book it a few hours later, it was gone.
The next frontier in airline pricing, experts say, could be individualized price quotes that vary from one customer to another based on a variety of factors, like their frequent flyer status, their purchase history with the airline, or their perceived ability to pay more (or less).
Airlines are looking into new software that can identify individuals through their computer’s IP address or their frequent flyer number. With that, they can mine personal data to come up with a customized fare that might squeeze out a bit more revenue for the airline, or lure in a new customer who hasn’t flown with that carrier before by offering a personal discount.
It’s called “dynamic pricing,” and it could be the next big thing in air fare searches. John McBride, an executive with software developer PROS, told the trade publication Travel Weekly that 2018 will be “a very phenomenal year” for this kind of technology. “Based on our backlog of projects, there will be a handful of large carriers that move toward dynamic pricing science.”
McBride said that 11 of the company’s airline clients are already using its software to generate real-time dynamic offers within direct sales channels, including their websites. Several of those airlines are making the price offers by adjusting from their published fares, while others are generating offers from scratch. Though he wouldn’t identify the airlines for contractual reasons, McBride said they are mainly major carriers and are based around the globe.
In cases where airlines have been trying out the concept on their websites, PROS airline customers have squeezed out an extra 7 to 10 percent in revenue. That may sound paltry, but it’s music to the ears of airlines which typically operate with very thin margins.
This is not the first time we’ve seen this type of selling from travel suppliers. In recent years, several reports showed that search results varied based on the type of device or browser being used. Now it sounds like airlines could dive even deeper into personal data to create individualized pricing.
It remains to be seen how the traveling public might react to the concept once they become aware that the air fare they’re paying depends who they are.