What is Dynamic Pricing?
Dynamic pricing is a system of pricing that was initially developed in the retail industry. This method of pricing is growing in popularity within the travel industry, and adjusts fare offers according to the individual making the enquiry. The fare offer is based on the consumer’s previous purchases and habits.
Why do travel providers use dynamic pricing?
Travel providers argue that this method of pricing can help them to offer discounts and rewards to loyal customers, and also adjust prices according to a range of immediate factors like demand and availability. This would, in theory, boost sales by offering appropriate pricing while giving customers access to superior products at fair prices.
Is dynamic pricing fair?
There are some concerns that this method of pricing could cross ethical lines by using targeted marketing. Some critics suggest that travel providers might base the price on personal demographics in an attempt to set the price at what they think customers can afford. As concerns around big data continue to develop, the role of dynamic pricing will evolve in tandem.
How does dynamic pricing affect corporate travel?
Not tied into contracts
In some situations, dynamic pricing can be a positive for travel managers booking at scale. Rather than being tied to static costs and missing out on lower market prices, dynamic pricing means that travel managers can book more fluidly and benefit from the latest changes to pricing.
Difficult to budget
Dynamic pricing makes budgeting difficult for travel managers. This is why many companies create strict budgets and when it comes to booking travel, they prefer fixed pricing. As dynamic pricing continues to grow in popularity, we might see companies reassess budgeting techniques for travel.
A challenge for compliance
Dynamic pricing can represent a challenge for compliance too. The Corporate Travel Policy of a company might establish a maximum fare rate, but this rate could fluctuate from one employee to the next. Dynamic pricing will have to be accounted for in Corporate Travel Policies going forward.