Imagine if airlines could tailor fare offers based on who was making the ticket inquiry, rather than strictly on the search criteria.
Well, industry technology and revenue-management experts say those days are fast approaching.
In fact, a few airlines have already implemented what is known as dynamic pricing on some ticket searches within their own channels, according to the revenue management software provider PROS, which works with some 80 airlines worldwide, including Southwest, Lufthansa, Emirates and Aeromexico.
“2018 will be a very phenomenal year in terms of traction,” said John McBride, director of product management for PROS. “Based on our backlog of projects, there will be a handful of large carriers that move toward dynamic pricing science.”
Critics of the technology warn of a growing lack of transparency if fares are priced dynamically.
Conceptually, dynamic ticket pricing is simple. An airline identifies the person making a flight inquiry, then mines its data for that person’s flying history. The person could be identified if he or she is logged into an OTA or into an airline website through a frequent flyer account.
Much as Amazon does today to remember shopping histories, those sites could also set cookies at login to identify a person (or at least the device being used) for subsequent searches in which the individual is not logged in, said Phocuswright technology analyst Bob Offutt. And there are also technology companies that provide the capability to identify consumers across multiple devices without the need for login information, McBride said.
The revenue-management platform then uses an individual’s flight-shopping history to generate a person-specific fare offer that differs from the offer some other shoppers might get for the same fare inquiry at the same time.
Experts say such technology is most likely to be used to offer discounts to customers with loyalty status and to generate bundled fare offerings that fit the customer’s profile. But in theory the technology could also be used for different purposes, such as to induce a new customer with an especially affordable ticket or to offer a higher ticket price to someone who is likely to be undeterred by an upcharge.
Dynamic pricing platforms will also generate specialized offerings based on the profile of a fare search, even if they don’t have the specific identity of the shopper, said Peter Belobaba, the airline industry program director at MIT who helped author a recent discussion paper on advances in airline industry revenue management and distribution for the Airline Tariff Publishing Co. (ATPCO), the airline-owned corporation that collects and distributes fare data.
