Dynamic pricing is the preferred pricing strategy for the travel industry. Revenue management professionals and complex machine learning systems set the pricing of airline fares and hotel rates based on supply and market demand and has evolved considerably since its use in the travel industry in the early 1980s. Deregulation by governments has seen this area flourish as a discipline.
Additional factors are often included in dynamic pricing algorithms that track broader market conditions such as competitor pricing, legislative restrictions (such as those born out of COVID-19, and even forecast weather conditions.
Dynamic pricing is the reason that at any given time, two people purchasing the same product might effectively end up paying different amounts.
Counterintuitively, the lowest prices can often be found much closer to departure than commonly thought where advance purchase rates are perceived to be cheaper.
Airline revenue management systems are now able to file updated prices hourly which can mean travelers often pay far above the average market price for their tickets.
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