Struggling to find a cheap flight?
Travel providers using AI to reprice offers, often several times a day,
Optimistic that you can easily find the best airfare and hotel rate for your next vacation or business trip? Think again.
Travel providers now use artificial intelligence software to reprice their offerings, sometimes dozens of times a day, to maximize revenue. For business and leisure travellers, the result is a variation of the catand-mouse game, where travel companies are almost always the cat.
Traditionally, hotels and airlines priced their offerings depending on peak demand periods, past sales data and the number of current reservations. Individual hotel properties could make changes if, for example, their hotel was emptier than usual for an upcoming date and a lower room price would spur demand.
Now, changes in travel pricing are being made much more frequently. The practice, called “hyperdynamic pricing,” is poised for significant growth, said Angela Zutavern, a managing director at the technology consulting firm AlixPartners and the author of “The Mathematical Corporation: Where Machine Intelligence and Human Ingenuity Achieve the Impossible.”
Hyperdynamic pricing factors in lots of data. Along with historical and seasonal information, the new AI systems scan the web for global news events, weather predictions, trending Google searches, social media posts, local event schedules and other factors that could affect demand, Zutavern said.
Did singer and rapper Lizzo just announce a concert tour? The system may anticipate a spike in demand at hotels in cities on her tour and raise rates there. Have hurricanes been in the news? Flight prices may need to come down to entice travellers to tropical locations.
“The systems give hotels and other travel companies the ability to make more frequent changes, experiment and then see the impact of the price changes,” Zutavern said.
According to research by the Montreal-based airfare prediction app Hopper, the average price of a domestic flight changes 17 times in just two days, while international flights change a dozen times in that span. Prices on high-traffic routes like New York to London can change up to 70 times over two days.
Theresa Van Greunen, assistant vice president of corporate communications of Aqua-Aston Hospitality, based in Hawaii, said her company manages Marriott and Hilton-affiliated hotels, which each have their own proprietary dynamic pricing systems. It also manages about 40 independent hotels that use Aqua-Aston’s pricing system. All employ artificial intelligence.
“AI gives us more insights into our data, and opportunities to be more nimble,” she said, not only in room pricing, but in suggesting to hotel management how to price special offers and whom to send those offers to, based on expected financial returns.
These kinds of insights are “especially important to smaller operators trying to compete with giant global brands,” she said.
Some travel companies are buying technology companies to jump-start new pricing capabilities. Last fall, Oyo Hotels and Homes, an Indian hospitality chain, bought Danamica, a Danish data and dynamic pricing company.
In response to the fluctuating prices, corporate travel departments that book business trips for their employees have begun to develop strategies to catch the lowest prices. Last year, Egencia, Expedia’s booking platform for corporate travel departments, introduced a feature that would scan the internet for prices on airline tickets that were already bought through its system. If a cheaper fare for the same flight and class of service was found within 7 days of purchase, the system would automatically cancel and rebook the ticket without any action required from the traveller or the traveller’s company.
Egencia is rolling out a similar feature for hotel rooms that scans for price drops and rebooks the room at the lower rate. The company charges clients a small fee when it finds and rebooks lower rates.
Egencia is also introducing Smart Mix, which analyzes business travellers’ data to determine their preferences — taking morning versus evening flights out of their home city, for example, or staying at certain hotel chains — and combining that information with their employers’ travel policies to suggest appropriate flights and lodging.
Individual consumers can’t compete with the resources and computing power of the travel companies, but there are a few ways they can improve their odds of getting a good fare or room rate.
Gary Leff, founder of the travel blog View From the Wing, advises travellers to avoid booking hotel room rates that cannot be refunded or changed, even if the price is slightly lower than a more flexible rate. He recommends instead that travellers periodically check for lower rates on the hotel website or other sites that the hotel might match. Members of some groups like AAA can often get a rate as low as the nonrefundable rates without the restrictions, he said.
Hopper said it analyzed 10 years of airline pricing, monitored hotel pricing around the world and tracked customer behaviour to offer travellers advice on the timing of hotel room and airfare purchases and optimal routes. It also suggests alternatives to save money. The company said it had about 45 million customers in 120 countries.
Hopper also analyzes customer interactions within its system to make suggestions. If, for example, a large number of travellers who are monitoring the price of flights from New York to Rome are also monitoring the same dates for New York to Milan, Hopper’s AI recommendation system may suggest Milan as an alternative destination for all customers.