Marriott is set to introduce dynamic pricing to its Bonvoy reward travel program. Effective in September, travelers will need to spend 14 – 33 percent 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
Dynamic pricing is a common tactic in revenue management (also known as yield management), allowing 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 three 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, myself usually set up a price alert on Google Flight 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 mileages 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 its revenue performance. One essential difference between a hotel reservation and a confirmed airline ticket is the timeframe for free cancelation. On the one hand, airlines typically only offer a 24-hour window for free modification or cancelation. 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[1].
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 an 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 tactic will work well on both regular and award nights, especially now when the big hotel chains, including Marriott and IHG, are adding dynamic pricing to their reward programs.
In the end, I remind travelers to be very careful with the prepaid rate because it usually means “non-refundable” no matter for what reasons. Instead, travelers may be able to get 5 to 15 percent 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 is the specials offered during the happy hours. Similarly, some restaurant 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 products. 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 price
Besides the above suggestions, being flexible is probably the key to save on travel. If schedule allows, search for an alternative 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 in a budget? What are your suggestions to save on travel?
[1] Please check the cancelation policy carefully for every reservation because the terms vary from one hotel to another and from time to time, even for the same hotel.
Dynamic pricing has both pros and cons to it as on one hand, it can allow for cheaper travel fees for when there’s a low season. On the other hand, however, dynamic pricing can lead to difficulties with planning events that are further into the future. It would probably be better to plan around a few months ahead than a full year ahead as it’s better to find out how much it will cost easier. Also as your blog suggested being flexible is key in traveling as a few days early or later can help you save more money.
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