It is common knowledge that air fares fluctuate. But why might it be that after booking your tickets to Disneyland, the flight you were looking at the day before has suddenly shot up in price?
The company you were booking could have been using personalised pricing, also known as surveillance pricing. This is where businesses tailor prices to individual customers instead of offering a standard fixed price.
They do this by harvesting personal information from data analytics and your online behaviour to learn about your purchase history, location, and demographics.
With this profile, they can use artificial intelligence to analyse your search habits, determine what it thinks you might be willing to pay and set the price accordingly.
In this case, since you booked your Disneyland tickets first, the airline would know you now need to book flights on specific dates and can slap on a premium.
Are airlines using personalised pricing for air fares?
There is a difference between dynamic pricing and surveillance pricing. Dynamic pricing adjusts fares based on external factors like demand, timing or competition and is well established in the travel industry. A flight around Christmas, for example, costs more because it is a high-demand period.
Surveillance pricing uses your personal data, such as internet browsing habits or location, to set a price just for you. It is not currently clear whether airlines are actually using this kind of pricing or not.
All kinds of industries, from finance to online gaming, do employ personalised pricing. So far, the travel sector has not been transparent about adopting the strategy, but experts say the hallmarks are there.
Last year, the US consumer watchdog asked eight companies to provide information on how dynamic pricing and surveillance pricing were being used to set airfares in an attempt to find out how widespread this practice is.
Recent controversy came after Delta Air Lines announced plans to increase its use of AI to set prices, meaning it can charge customers based on the specific flight they want to take on a particular date. It said that 20 per cent of domestic flights would have their prices set by AI by the end of 2025.
The statement was met with accusations of personalised pricing and a backlash from consumers and industry professionals.
Delta, in turn, pushed back against the claims, saying the price fluctuations will be based on market factors – a system known as dynamic pricing – rather than consumers’ personal data.
“There is no fare product Delta has ever used, is testing or plans to use that targets customers with individualised prices based on personal data,” the company said in a letter to US lawmakers.
The AI technology Delta will use has been developed by the start-up Fetcherr, who say it functions by “streamlining processes already in place at companies and does not allow for individualised or personalised pricing”.
Whether or not airlines are actually using surveillance pricing, these recent questions have raised serious concerns about transparency, fairness and the privacy of travellers’ personal data.
Where is personalised pricing used in the travel industry?
Experts suggest the use of personalised pricing also goes beyond individual airlines and airfares.
According to marketing company TechTarget, “Online travel agencies offer different prices for the same flight based on a user’s search history or device type.”
Sales platform BuzzBoard claims that booking website Hotels.com also uses this strategy to generate personalised offers, destination suggestions, and special deals to customers.
“By analysing a customer’s travel preferences, booking history, and search behaviour, hotels can offer targeted promotions and recommendations that are highly relevant to their needs and interests,” it says.
How can consumers avoid personalised pricing?
While it’s not clear whether companies like airlines are employing personalised pricing, it’s worth being prepared should it become commonplace in the future.
When booking a trip online, start by clearing your cache, Professor Jay L. Zagorsky, who teaches business school students how to set prices, wrote in a recent article for The Conversation.
This deletes your search history and cookies, which would otherwise provide algorithms with a wealth of personal information.
Many computer pricing algorithms also leverage your location, since it is a good indicator of income. Try disabling location services in your operating system settings.
Aktarer Zaman, founder and CEO of online travel agency Skiplagged, suggests using a third-party search engine – one that doesn’t use personal data to set prices.
“When doing this, the underlying supplier does not have as much information about consumers as they would if you were searching directly on their site and they’re essentially booking in ‘incognito mode’,” he says.
“[For example] Skiplagged allows travellers the best chance of not being profiled by the airlines or other booking sites.”
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