Did your great fare dis­ap­pear? Blame ‘dy­namic pric­ing.’

The Washington Post Sunday - - TRAVEL - CHRISTO­PHER EL­LIOTT

You prob­a­bly know what Melanie Fra­zier felt like when she re­cently tried to book a flight from Port­land, Maine, to At­lanta.

She found a $257 fare — not a bad deal — but by the time she got around to book­ing the ticket on­line a few hours later, the price had risen to $441. Un­de­terred, she set up a fare alert through Google, and a week later, sure enough, the fare plunged to $246.

Fra­zier, a re­tired fed­eral em­ployee who lives in Port­land, went through all the steps re­quired to pur­chase the ticket. “But when I hit the pur­chase but­ton, a screen came up that read, ‘FARE CHANGE — Looks like there’s high de­mand for this flight.’ ” The new price: $402. Broadly speak­ing, Fra­zier ex­pe­ri­enced some­thing called dy­namic pric­ing. It’s where the fare or rate fluc­tu­ates, often from minute to minute, aided by so­phis­ti­cated com­puter pro­grams that pre­dict de­mand. Chances are, it has hap­pened to you, too.

In a per­fectly fair world, a prod­uct costs the same no mat­ter who you are or when you buy it. But the world of travel is far from per­fect. Com­pa­nies use dy­namic pric­ing to max­i­mize their prof­its, charg­ing the most dur­ing times of peak de­mand and low­er­ing rates when no one wants to travel. While the process seems wrong to con­sumers such as Fra­zier, in­dus­try in­sid­ers say that it’s not only nec­es­sary but fair.

As al­ways, though, there are ways to game the sys­tem to en­sure that you don’t over­pay for your next trip.

The price spread in the travel in­dus­try can be dra­matic. The dif­fer­ence be­tween the high­est and low­est av­er­age air­fare dur­ing March, a tra­di­tional month for book­ing sum­mer travel, was $189, while the spread be­tween the high­est and low­est av­er­age ho­tel rate was $196, ac­cord­ing to Adobe An­a­lyt­ics.

If that range strikes you as strange, you’re not alone. Ev­ery­one knows air­line prices fluc­tu­ate, says Mar­wan Ba­trouni, a se­nior di­rec­tor at Ad­vito, a travel con­sult­ing firm. “On the ho­tel side, how­ever, dy­namic pric­ing is rel­a­tively new and be­com­ing more preva­lent,” he says. Rates used to be pretty sta­ble, chang­ing in­fre­quently. “Now they fluc­tu­ate on a daily or even hourly ba­sis,” he adds.

But is dy­namic pric­ing, at least as it now is prac­ticed, fair?

Yes, says Peter Vl­i­tas, Travel Lead­ers Group’s se­nior vice pres­i­dent of air­line re­la­tions. His com­pany has $21 bil­lion in sales vol­ume ev­ery year, in­clud­ing air­line sales. So if any­one un­der­stands the ins and outs of ticket pric­ing, it’s Vl­i­tas. The proof is in the prices.

“Right now, the Amer­i­can con­sumer is ex­pe­ri­enc­ing some of the least-ex­pen­sive air­fares ever, ad­just­ing for in­fla­tion,” he says. “The air­line ben­e­fits by of­fer­ing a higher price point for the con­sumer who is will­ing to pay for it. The con­sumer who wants a lower price will choose cer­tain flight times or book ear­lier.”

So why does dy­namic pric­ing feel so wrong?

“When the fare they see to­day is not there to­mor­row, the level of stress it cre­ates in the pur­chase path leaves the prac­tice less than de­sir­able in the minds of con­sumers and book­ing agents alike,” admits Mike von Fo­er­ster, chief ex­ec­u­tive of RightRez, a firm spe­cial­iz­ing in travel tech­nol­ogy and au­to­ma­tion.

In other words, dy­namic pric­ing is great for air­line pas­sen­gers and ho­tel guests when they win, but when they lose, the en­tire in­dus­try looks bad.

He­len Prochilo, who runs Pro­mal Va­ca­tions, a full-ser­vice travel agency in Long Beach, N.Y., has learned to work around the sys­tem. When she in­cludes a price quote, she now promi­nently men­tions the date and warns that the rates could “change at any time” un­til booked and air­fare is paid in full.

Still, her clients are often caught off guard by the price swings. Just re­cently, she found a flight for a client from New York to West Palm Beach, Fla. The client called back the next day to con­firm.

“By then, the price had gone up $200,” she re­mem­bers. The trav­eler grudg­ingly agreed to the new price. “As I was with her on the phone book­ing the tick­ets, the price went up an­other $25.”

Even then, the cus­tomer booked the air­line tick­ets. And, in a sense, that’s how dy­namic pric­ing is sup­posed to work. The al­go­rithms that pre­dict de­mand cor­rectly fore­cast that Prochilo’s client would buy the tick­ets at a higher price — and she did. But in an­other sense, the en­tire episode looks like a bait-andswitch ex­er­cise.

It’s only go­ing to get worse, ex­perts say. The pro­grams that set th­ese prices, often re­ferred to as yield-man­age­ment sys­tems, are be­com­ing more so­phis­ti­cated. They can now use per­sonal data about you to pre­dict when you’re likely to buy and how much you’ll pay.

“Con­sumers should be­come re­signed to the idea that we are in­creas­ingly be­ing tar­geted for our in­di­vid­ual con­sump­tion,” says David Pyke, a pro­fes­sor of op­er­a­tions in the Univer­sity of San Diego School of Busi­ness. Com­pa­nies are us­ing smart­phones and geo-tar­get­ing, or cre­at­ing pre­dic­tions based on your lo­ca­tion, to squeeze more money from their cus­tomers.

And if you think air­fares are ab­surd, wait un­til you see what’s next, he warns.

“If you just bought hot dogs, and it’s the Fourth of July, a re­tailer may de­ter­mine it’s time to raise the price on hot dog buns,” he says.

To win this game, cus­tomers have to act coun­ter­in­tu­itively. For ex­am­ple, in­stead of book­ing a ho­tel room for the La­bor Day hol­i­day, look to the week af­ter that, when de­mand is lower. There’s tech­nol­ogy you can lever­age to your own ben­e­fit, such as Google Flights, which al­lows you to track prices. You can also use a site like Kayak or an app like Hop­per to de­ter­mine the best time to book. Th­ese sys­tems aren’t per­fect, but they’ll at least tell you which times and days to avoid.

Us­ing apps and sites, and a good travel agent, can help you keep up with th­ese com­puter pro­grams that set prices. But in the end, the only way to beat the sys­tem may be to do what it doesn’t ex­pect.

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