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Travel dilemmas: Dynamics of pricing | TravelWireNews

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Simple supply and demand? Yes, but with a twist.

“What’s happening is not new in the world,” said George Hoffer, a transportation economist at the University of Richmond in Virginia.

Whether we’re talking about yield management, dynamic pricing or surge pricing (which you hear in connection with ride-sharing services), “it’s called price discrimination, and price discrimination has been around for well over 100 years.

“It exists whenever two people are charged different prices for essentially the same good or services and the price difference cannot be justified by cost differences.”

To be successful in price discrimination, various conditions must be present. Among them: The travel provider has to understand “intensities of demand,” Hoffer said, and it cannot allow resale – which is what happens with airline tickets. Prices go up at the holidays, for instance, and you cannot resell an airline ticket.

“An airline will have more than 20 different fare codes,” said James Filsinger, chief executive of Yapta, which keeps track of hotel and airline prices even after you have booked and can possibly help you get a refund. That means airlines “have 20 different levers they can pull to set airfare prices at different price points.”

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Travel dilemmas: Dynamics of pricing | TravelWireNews.