Revealed: Why using ‘hacks’ to hunt for the cheapest plane ticket is a waste of time (but there is one exception to the rule, say researchers)
- A new study has examined howĀ prices are set at a major U.S. airlineĀ
- Hacks such as buying your ticket on a Tuesday are largely futile, the study findsĀ
- READ MORE: Hack for getting return flights to the Maldives for under Ā£250
Buying your ticket on a Tuesday, searching via your browserās incognito mode or using a VPN to pretend you live in a different location – if you try to snag cheaper flights using popular hacks like these, itās largely a waste of your time.
Thatās according to a new study that examined the structure and processes behind how prices are set at a major U.S airline.
The pricing system that the research uncovered, which is said to be representative of airlines around the world, is at odds with what most travellers assume it to be.Ā
The study was co-authored by Olivia Natan of Berkeley Haas School of Business, who says: āThere are so many hacks out there for finding cheaper airline tickets. But our data shows many of these beliefs are wrong.ā
Natan, who conducted the research alongside academics from the University of Chicago, Yale, and the University of TexasĀ at Austin, adds: āWe initially didnāt know how to rationalize the things we were seeing.ā
Trying to snag cheaper flights using popular hacks – such as booking on a Tuesday – is largely a waste of your time, a new study has revealedĀ
That said, there is one silver lining for bargain-hunting travellers – the study reveals that there is a set window of booking time to avoid if you want to secure better value fares. Here is how airlines price their flightsā¦
SUBSTITUTING CONVENIENCE FOR PRICE
Airlines donāt consider how customers try and find a balance between convenience and price with their flights ā sometimes sacrificing convenience for a cheaper ticket, the study found.
When a traveller is comparing flights, even if one flight is very convenient in terms of departure time or departure airport, they might be inclined to opt for a less convenient flight if itās slightly cheaper.
However, Natan says that āairlines donāt consider this kind of substitutionā. She explains that the airlines think about the prices of seats on each individual flight rather than the total seats sold in a day, āeven though changing the price on one flight will affect the way people think about all their optionsā.
A SMALL MENU OF PRE-SET PRICES
The study found that surprisingly, airlines donāt incorporate the prices of their competitors in their automated price-setting ā meaning that if one carrier cuts its prices, rival airlines wonāt necessarily follow suit.
Instead,Ā airlines have a fixed and relatively small number of prices that they assign to tickets on each flight, operating with large gaps between each possible price āsometimes upwards of Ā£80 ($100). The study explains that the airline may sell the first 30 economy tickets at the lowest price, and then the next 30 tickets at the next possible price, and so on.
The researchers found that even if the airline would like to increase the price of a ticket by Ā£80 ($100) they only do so about 20 per cent of the time, in order for the the figure to fit into this menu of pre-set prices.
Airlines have a fixed and relatively small number of prices that they assign to tickets on each flight, the research findsĀ
Natan says: āAirline tickets are sold through global distribution systems that make sure a travel agent in Wichita sees the same price as you do on your computer at home.ā
The study explains that this system emerged from an industry alliance to facilitate inventory management, with other businesses in the travel sector, like hotel rooms, cruises, trains, and car rentals, doing the same.
The study notes that some airlines are starting to experiment with whatās known as ācontinuous revenue managementā, which would, for instance, assign 100 different prices to a flight with 100 seats. Natan says: āThat would make pricing significantly more variable, but even that would not be the kind of targeting that many consumers assume airlines use.ā
LACK OF COORDINATION WITHIN THE AIRLINE
A ‘strange’ lack of coordination between departments within the airline also determines the prices of flights, the study found.
It discovered that airlinesā pricing teams generally donāt raise prices, even if the increase assures an increase in revenue.Ā
Natan says: āWe talked to all of these managers who said the pricing team doesnāt know what itās doing.ā She says that the team could make more money if it started ‘selling fewer tickets at higher prices’.
Natan says: āIn practice, they seem to be choosing the menu of prices somewhat arbitrarily.ā
Flight prices go up significantly 21, 14, and seven days before a flight, the study revealsĀ
However, the study found that the revenue management team corrects much of this underpricing before tickets go on sale, by making ‘demand forecasts’ that determine final prices. The study, which was published in The Quarterly Journal of Economics, found that these forecasts are routinely inflated, reducing the number of underpriced tickets shown to consumers by roughly 60 per cent.
Summing it up, Natan says: ‘Itās very strange. It could simply be a consequence of teams from different departments not communicating.’ Natan notes that two other possibilities as to why airlines donāt maximize short-term revenue could be either to build customer loyalty or to avoid regulatory scrutiny.
WHEN TO BOOK FLIGHTSĀ
In the coming years, Natan says, airlines may start to adopt more dynamic pricing platforms, and non-business travellers may benefit from these changes. But for now, the hunt for a hack to find lower fares is ālargely futileā, the study reveals.
However, the study has found that itās wise not to wait until the last minute to book flights.
Natan says: āWhat I can say is that prices do go up significantly 21, 14, and seven days before a flight. Just buy your ticket before then.ā
Source: Read Full Article