Diwali travel: Demystifying data-driven pricing strategy of airlines

Authored by Ajay Verma, Managing Partner at 0101. Today

It’s know that family travel increases by almost 25-30% during Diwali. Reasons vary from children holidays, beginning of festival season, better climate in the west, marriage in the family or even just a long standing tradition etc. And planning all such visits starts with flight bookings.

Over 65% of the air travellers complain that prices climbs with every additional clicks. We need to understand that Airlines are not in charity business and they have deployed very sophisticated models and ML algorithms to understand real-time and maximise their revenues. Let’s break down the ‘HOW’ if we have recognised the ‘WHY’ behind this phenomenon.

Here's the secret : Understanding the data driven pricing strategy.

Airline ticket booking engines are not as straightforward as they may seem. They collect your data across device ID, Location, Sector, Type of airline, Your travel history, No. of people travelling, Time of travel, Your past behaviour data linked to price increase and more is passed in split seconds to the Airline – this data in some cases (using the device ID), then passes through a data enrichment layer to understand your demographic and behaviour data like your income segment, place of residence, your spends history, your mobile spends and history etc. which is then process at the airline end to create and execute Dynamic pricing strategies.

And imagine all this happens real-time offering the buyer a seamless buying process.

At the core, the airline dynamic pricing works on a demand supply model. The idea is to sell as many tickets as possible at the highest price the market will bear. Airlines don’t price tickets based on a single factor but instead consider a range of variables such as demand, seat availability, and the time of booking etc. There is number of seat reserved under different fare classes. As lower-priced seats sell out, the next batch of seats is priced higher. This is one of the many reasons why you see a jump in price after checking the same flight a few times.

These fare classes are also dynamic and moves up or down automatically depending on factors like demand fluctuations and time of travel. When demand increases, even from multiple searches, the algorithms increase the prices. An important source of this data is cookies and browser tracking. Website don’t just collect data pertaining to your searches on their website, but also look at your browser history. So if one has done travel searches or hotel bookings etc. the chances of presenting higher prices increases. This, however is either not done or openly accepted by some airlines.

Airlines also rely heavily on predictive engineering. Where seasonal or topical events drive the pricing. The algorithms understands that 26^th Jan – Republic day in 2025 is a Sunday hence the demand around that time will be moderate vs. if it is on a Monday to Friday. Alternatively, if there is a topical event that gets announced, the predictive engine assumes a demand expectancy surge and the prices are increased. This auto decision making price adjustment is done on models which not just rely on historic data but also continuously keep learning with every passing day.

There are also some rational reasons like fuel price or tax changes that impacts pricing, however there are some irrational factors also built in. Like the leader airline or the challenger airline pricing strategy. It is also seen that if Air India or Indigo increase prices other airline follow suit.

To sum, there are hundreds of factors the used to determine airline prices, and the rise in prices you see when checking the same flight repeatedly is not just a coincidence. It is one of the many sophisticated data-driven algorithms which are at play. Below are a few simple hacks, you can only try to outsmart these algorithms and find the best deals for your Diwali holiday travels.

Clear your Cookies or historical browsing regularly or use Incognito mode for browsing.
Booking early. It is a no brainer. It is time proven and understood hack, but very effective.
Be flexible on dates – let the browser not know the exact date of travel.
Avoid searching the same sector, same date, same airline repeatedly. Note here searching from different devices does not help. The backend system know your different devices and have the intelligence to stitch them together.
Rather than repeatedly checking flight prices, set up email price alerts through websites like Google Flights, Skyscanner, or Kayak.

Some international airlines today have started to project their pricing predictions transparently, which helps travellers to plan themselves. There is high probability that some Indian airlines will start doing the same soon. Hopefully with this information you will be smarter and it should help in reducing stress of increasing airline prices this Diwali.

DISCLAIMER: The views expressed are solely of the author and Adgully.com does not necessarily subscribe to it.