What is Personalized Pricing and Is It Costing You More?

Understanding Personalised Pricing in the Travel Industry

Air fares are known to fluctuate, but have you ever noticed that after booking your tickets to a destination like Disneyland, the flight you were looking at the day before has suddenly become more expensive? This phenomenon can be attributed to a practice known as personalised pricing, also referred to as surveillance pricing. Unlike traditional fixed pricing models, this approach tailors prices to individual customers based on their personal data and online behavior.

Businesses collect information through data analytics, tracking users' purchase history, location, and demographics. With this data, they use artificial intelligence to analyze search habits and determine what a customer might be willing to pay. For instance, if you booked your Disneyland tickets first, an airline may recognize that you need to book flights on specific dates and adjust the price accordingly.

Dynamic vs. Surveillance Pricing

It is important to distinguish between dynamic pricing and surveillance pricing. Dynamic pricing adjusts fares based on external factors such as demand, timing, or competition. For example, flights around Christmas tend to be more expensive due to high demand. This method is well-established in the travel industry.

On the other hand, surveillance pricing involves using personal data—such as browsing habits or location—to set a price specifically for an individual. While this practice is common in industries like finance and online gaming, it remains unclear whether airlines are currently implementing it. However, experts note that the indicators are present.

Last year, a US consumer watchdog requested information from eight companies regarding how dynamic and surveillance pricing are used to set airfares. The goal was to assess the prevalence of this practice within the industry.

Recent Developments and Controversies

A recent controversy arose when Delta Air Lines announced plans to increase its use of AI for setting prices. This would allow the airline to charge customers based on the specific flight and date they choose. Delta stated that 20% of domestic flights would have prices set by AI by the end of 2025.

This announcement led to accusations of personalised pricing and backlash from consumers and industry professionals. In response, Delta denied these claims, stating that the price fluctuations would be based on market factors, a system known as dynamic pricing. The company emphasized that it does not use any fare products that target customers with individualised prices based on personal data.

The AI technology Delta will use was developed by the start-up Fetcherr, which claims it streamlines existing processes without enabling personalised pricing.

Beyond Airlines: Personalised Pricing in Other Areas

Experts suggest that personalised pricing extends beyond individual airlines and airfares. Online travel agencies often offer different prices for the same flight based on a user's search history or device type. Sales platform BuzzBoard highlights that websites like Hotels.com use similar strategies to generate personalised offers, destination suggestions, and special deals.

By analyzing a customer’s travel preferences, booking history, and search behavior, hotels can provide targeted promotions and recommendations that align with their needs and interests.

How to Avoid Personalised Pricing

While it is uncertain whether companies like airlines are employing personalised pricing, it is wise to be prepared if this practice becomes more common. When booking a trip online, consider clearing your cache, as this deletes your search history and cookies, preventing algorithms from accessing your personal information.

Many pricing algorithms also take into account your location, which can indicate income levels. Disabling location services in your operating system settings may help reduce the risk of being profiled.

Aktarer Zaman, founder and CEO of Skiplagged, recommends using a third-party search engine that does not track personal data. He explains that such engines allow users to book in “incognito mode,” reducing the amount of information available to airlines and other booking sites.

By taking these steps, travelers can better protect their privacy and potentially avoid being charged higher prices based on their personal data.