Good day, friends! It’s Isabella here again to answer your most important travel questions!
I received a comment from a reader who asked a question that you might have wondered:
“Why do airlines [but it could be hotels or car companies too] change their prices so often? Sometimes, I’ll look for a travel deal and the price will be $350 and one day later the same flight is selling for $320. Why do they change the price so often?”
My simple answer to this question is, “That’s supply and demand, babe”! LOL, I know that doesn’t answer the question but it’s true. Here is a more detailed answer…
Airlines [or hotels and rental cars] have a range of prices because passengers are not all traveling for the same reasons. Some travellers are going on a leisure break and they want a low price so they are willing to change their plans to obtain a great deal. Other travellers have business meetings on specific dates and so must travel at short notice. The business travellers are typically less ‘price sensitive’ compared to leisure travellers and expect to pay more for a flight.
The airlines know that leisure travellers tend to book early and want low prices while business travellers book closer to departure. Therefore, airlines let the “cheap seats” go early but retain some of their seats for late-booking business travellers that will pay a higher price. This all makes good business sense, of course, until competition amongst the airlines interrupts their plans!
Because travellers can visit travel sites and see the selling prices for many airlines, all airlines have to be competitive. Everyone wants to purchase at the lowest price so airlines have to continuously check their competitors to ensure that they are not too high or too low priced. Remember that all airlines are saving seats for late-booking business travellers that will spend more. Well, what happens if those late booking passengers don’t buy? Maybe those passengers booked on other airlines or maybe there weren’t as many late-booking passengers as the airline thought. This is when the airline that saved seats has a dilemma.
The airlines with excess seats can “tough it out” and possibly fly with empty seats that didn’t sell or they can drop their price close to departure and fill those seats. Dropping the price makes good business sense as well. An empty seat makes an airline no money but it does cost the airline. Airlines still have to pay for fuel, crew salaries, insurance and the mortgage on the airplanes – even if their seats are empty. If their seats are empty then the airlines are better off gaining even a low price for the seat because at least they are making something instead of nothing for the empty seat.
When an airline drops the price on empty seats close to departure, its competitors must match their fares or possibly have empty seats of their own. That’s the law of “supply and demand” and that is why airline fares will often drop after you’ve already booked.
That is also why JourneyHero works for you! JourneyHero monitors your bookings and when a lower price airfare, hotel or rental car becomes available, it will help you change to the lower price and put money back in your wallet. That’s the reason that good travel deals can even become better!
I think this feature of JourneyHero is wonderful! It’s almost as wonderful as relaxing on a sun lounger sipping a cold drink and taking the sun – which is what I’m going to do as soon as I can fly over to Cloud 9!
Take care, my friends, and send me any other travel questions you might have.
Love,
Isabella
Why do hotel and flight prices change so often? It is very annoying as a consumer and not sure it isn’t illegal from a fair or better business perspective.
Dear Jim,
Basically, prices change because demand changes. As demand increases, prices increase and as demand reduces, prices decrease. That’s not illegal but I agree with you that it’s annoying and not a good business practice. However, that can be used to the advantage of a traveller. For example, an empty hotel room is worth nothing to the property, but if they have a person in a room — even if they paid nothing for the room — then the guest will use the bar, restaurant and possibly other services. Meaning that the hotel will generate revenue from having guests in the hotel even if the room price was very low. This is one of the reasons that hotel room prices are volatile and frequently reduce after you’ve booked. The same process works for airlines. Airlines retain seats for late booking passengers who will expect to pay more. However, if the late booking passengers don’t materialise, then the airline will reduce the price of the seats on the flight to generate some revenues. At JourneyHero, we use our knowledge of this process to find better deals for the traveller. We will be launching soon in the marketplace and you should give us a try. You might like the prices being volatile if it puts money back in your wallet!
On behalf of Isabella,
–Shane Batt
CEO, JourneyHero