Understanding Personalised Pricing in the Travel Industry
It is widely understood that airfares can fluctuate. However, many people are unaware of why a flight they previously viewed might suddenly increase in price after they have already booked their tickets to a destination like Disneyland. This phenomenon could be attributed to a practice known as personalised or surveillance pricing.
Personalised pricing involves tailoring prices based on individual customer data rather than offering a fixed rate. Companies gather information through data analytics and online behavior tracking, including purchase history, location, and demographics. Using artificial intelligence, they analyze search habits to determine what a customer might be willing to pay and set the price accordingly.
In such scenarios, if a customer books their Disneyland tickets first, airlines may recognize this and adjust flight prices for specific dates, potentially charging a premium. While this method is not yet fully transparent, it raises questions about fairness and privacy.
The Difference Between Dynamic and Surveillance Pricing
Dynamic pricing adjusts fares based on external factors like demand, timing, or competition. For example, flights around holidays tend to cost more due to high demand. In contrast, surveillance pricing uses personal data, such as browsing habits or location, to set prices tailored to an individual.
Currently, it is unclear whether airlines are using this form of pricing. However, experts suggest that the travel industry has shown signs of adopting similar strategies. Last year, the US consumer watchdog requested information from eight companies regarding how dynamic and surveillance pricing are used to set airfares.
Delta Air Lines and AI-Driven Pricing
Recent controversy emerged when Delta Air Lines announced plans to increase its use of AI for setting prices. This would allow the airline to charge customers based on specific flights and dates. By the end of 2025, 20% of domestic flights were expected to have AI-set prices.
This announcement led to accusations of personalised pricing, prompting backlash from consumers and professionals. Delta denied these claims, stating that the price fluctuations would be based on market factors, not personal data. The company emphasized that no fare product uses individualised pricing based on personal data.
The AI technology used by Delta was developed by Fetcherr, which claims it streamlines existing processes without enabling personalised pricing. Despite these assurances, concerns about transparency and fairness remain.
Broader Applications of Personalised Pricing
Experts suggest that personalised pricing extends beyond individual airlines and airfares. Online travel agencies often offer different prices for the same flight based on a user's search history or device type. Platforms like Hotels.com use similar strategies to generate targeted promotions and recommendations.
By analyzing travel preferences, booking history, and search behavior, hotels can provide relevant offers that cater to individual needs. This approach enhances customer experience but also raises ethical questions about data usage.
How to Avoid Personalised Pricing
While it is uncertain whether companies like airlines are employing personalised pricing, it is prudent to prepare for potential future changes. When booking trips online, clearing your cache can help delete search history and cookies, preventing algorithms from accessing personal data.
Location services can also influence pricing, as they indicate income levels. Disabling location services in your device settings may help avoid such biases. Additionally, using third-party search engines that do not track personal data can reduce the risk of being profiled.
Skiplagged, an online travel agency, recommends booking in "incognito mode" to avoid being tracked by airlines or other booking sites. This approach provides a better chance of avoiding targeted pricing strategies.
Conclusion
As the travel industry continues to evolve, the use of personalised pricing remains a topic of debate. While some companies deny employing such practices, others are exploring AI-driven solutions that could reshape how fares are set. Consumers should stay informed and take proactive steps to protect their data and ensure fair pricing.