Understanding how airlines price their fares can be a minefield – and the cost of a ticket can change multiple times per day. This makes it difficult for business travelers to secure the best price, so many corporations end up paying more than average for travel.
Despite the complexity, we knew that pre-COVID airlines looked at past demand, as well as analytical data, to forecast future trends and set their prices. However, COVID-19 has created an unprecedented environment for airlines, and the criteria for pricing has become even more complex.
Extreme and unpredictable price fluctuations will become more common as airlines grapple with sudden border closures, travel quarantines, bankruptcy fears and flare-ups in COVID cases around the world. The task of locking in the best fare will therefore become even more difficult for corporations.
This is where airfare price tracking could become a savior for corporations. Companies like FairFly can track the price airfares after they’re booked and can cancel and rebook that same flight each time its cost goes down.
Let’s look a little deeper at why airfare tracking has become so relevant.
Price changes are unpredictable
Airline pricing is usually based on a variety of scientific models. First, airlines analyze peoples’ motivations to travel, setting the price they believe each traveler persona is willing to pay. They balance this with other factors such as historic data, seasonality, capacity and competition.
However, airlines can no longer rely on historic data – as there is no historic data for times like these. And no one knows how the models airlines have been using for years will change given the unprecedented and constantly-evolving situation.
Airlines’ pricing strategies are instead focused on attracting people to travel again while reacting to numerous, highly unpredictable situational changes. As a result, when a company books a flexible ticket without price tracking, it is even more likely to be paying a premium price with no way of knowing.
Cost savings are even more critical to business recovery
A recent survey found that three-quarters of business travelers expect they’ll travel as much as or more post-COVID than they did pre-COVID. This shows a strong willingness to travel once people feel safe. This may create a sudden influx of travel requests, as companies attempt to make up for business lost throughout the pandemic.
However, many industries have been hit hard by COVID and, while traveling to do business may be crucial to recovery, so is making cost savings. Travel managers will, therefore, need to control the cost of travel. Introducing automated functions, such as airfare tracking, will lower the cost of travel and allow corporations to conduct a greater number of trips within their overall T&E budget.
Corporations can benefit from higher volatility
IATA predicts it could reach 2024 before business travel volumes return to pre-COVID levels. In the meantime, airlines are losing vast sums of money, having cut their routes to bare minimums, and compete on the few remaining profitable routes. Therefore, in the short-term, airline revenue management systems are having trouble setting stable pricing.
Based on FairFly data, volatility is at its highest in 2020 showing extreme fluctuations in price. This presents an opportunity for companies to benefit from sudden drops in travel costs. However, as this situation is constantly unravelling, it’s difficult to secure a fare during a price dip without price tracking.
Protect against all-time high costs
We’re likely to see further airline bankruptcies, leading to decreased competition in some markets. Therefore, many routes could be subject to ‘monopoly pricing’, where an airline can increase prices based on reduced supply versus demand. Although other airlines will step in to fill this void, it’s likely to take some time – travelers will see higher prices in the medium term.
For example, say there are two airlines that fly between Tel Aviv and London. Airline 1 goes bust; therefore, Airline 2 increases its prices to tap into continued demand. Corporation X then books a ticket with Airline 2 for a business meeting in two months’ time. The price paid is likely to have been “monopolized”, meaning the corporation paid more than it would have prior to Airline 1’s collapse. However, one month later, Airline 3 seizes the opportunity to introduce a Tel Aviv to London route. This increased supply now meets demand again and pushes the price of Airline 2’s tickets back down.
In this instance, airfare price tracking could cancel the corporation’s original ticket and rebook it at the lower price, saving it money.