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Dynamic Pricing: Demystifying Price Changes in the Travel Industry

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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

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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 

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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. 

Seasonality

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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

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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!

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