Dynamic Pricing: Demystifying Price Changes in the Travel Industry

Share This

Dynamic pricing (or surge pricing) is an often misunderstood concept in the travel industry. The idea of airlines dropping prices to fill seats sounds like an enticing way for budget travelers to get a good deal, right? But price changes can be difficult to predict, and people are often misled by common misconceptions and presumptions. To learn how to become a more savvy budget traveler, we’ve got the breakdown on what dynamic pricing is and how you can use it to get the best deal possible.

What is Dynamic Pricing

A hand grasps a lever behind a computer, representing how airlines manipulating pricing

(Image provided by Adobe Stock)

Dynamic pricing refers to when a product or service changes pricing depending on a number of potential factors. Companies will do this for many reasons, such as to take advantage of increased demand, to offload overstock, or to bring in new customers. Surge pricing, where a company increases prices due to high demand, is a form of dynamic pricing, but not all dynamic pricing includes increasing prices. Dynamic pricing is frequently used in the travel industry, with flights, hotels, car rentals, and cruises all regularly adjusting their prices. This means that the exact same trip can cost two very different prices if it is taken at different times of the year. 

Booking Last Minute 

A woman clenches a pencil while at her computer

(Image provided by Unsplash)

Airlines, hotels, and cruises often adjust their prices as the date of the booking approaches. If demand is high, they will increase prices to maximize profit. If it looks like they are not going to fill up, they will decrease prices to entice more bookings. This means that prices could go up or down as the date of your trip approaches. But it is more likely that prices will go up than go down, so it is not usually a good tactic to wait to book your trip. If you are trying to book last minute to get a good deal, that only really works if you are jumping on a deal when you see it and planning your vacation around that. If you know exactly where and when you are going in advance, then it is usually better to book as early as possible. 


A forest is depicted in all four seasons

(Image provided by Adobe Stock)

Almost any destination that you could visit has a busy season and a slow season, with prices typically being better in the slow season due to the decrease in demand. As a destination is shifting in between busy and slow, you will also get the shoulder season, which provides an optimal time for budget travelers. Booking around seasonality is a great way to use dynamic pricing to your advantage as it is easy to predict when prices will go down. A quick google search will tell you when a destination's busy season is and why people stay away from the slow season. It might not feel worth it to book a cruise during hurricane season, but that is what travel insurance is for!

Date and Time

The view from a plane in the wee hours of the morning

(Image provided by Unsplash)

In addition to seasonality, the day of the week and time of day can affect pricing as well, specifically with flights. Flights will be more expensive if you are flying on the weekend, with Tuesday and Wednesday usually offering the best prices. Very early and very late night flights also experience less demand, for obvious reasons. If you can swing an inconvenient flight time, this can be another way to take advantage of dynamic pricing. Hotels also have different pricing for different days, with weekends often being more expensive. You’ll want to be cautious though, as some events like conferences and concerts can cause a price spike in the middle of the week. Check local events and make sure there aren't any major events to avoid paying more for your flight and hotel!

Cheap Vacations in Los Angeles: How to Stay Under Budget

Take a cheap vacation in one of the most expensive cities in the states

Captivating Cambodia: The Pearl of Southeast Asia

Read on for your guide to the underrated charms of Cambodia

Fort Lauderdale's Off Season: The Cheapest Time to Go

Take advantage of low prices and thin crowds during Fort Lauderdale's off season

Hotel Star Ratings Guide: From Budget Rooms to Luxury Suites

Confused about hotel Star Raitings? We've got everything you need to know

How to Use Fare Alerts to Save on Last Minute Travel

Learn all you need to know about how to save on last minute travel with fare alerts

Shoulder Season: What Veteran Travelers Don't Want You to Know

Get the low down on what shoulder season is, and how it can enhance your next vacation