After looking at air and hotel pricing, what happens with the Clash of Titans when search and dynamic pricing face off?
To start off, are you tired of being gamed? Tired of being put off by acres and acres of ads and sponsored links and not so subtle forms of promotion guided on by more come-ons than a porn portal?
Well, welcome to Travel Search circa 2010.
It seems that a lot of people are beginning to get ticked (as opposed to ticketed) off by this behavior. Even the digirati is starting to notice, just see what Techcrunch had to say recently about TripAdvisor.
I have a simple problem that I cannot seem to solve. It keeps me awake at night and I don’t see any simple solution to it. The problem is rooted in the design of airline products – air fares.
Fundementally a legacy airline distributes its products by allowing its distributors to determine the price of its product according to a set of rules. As long as the game is played right, then we are all okay.
However, if the game is not played right then the airline issues a debit memo to the agent. This often comes with a penalty of the price of the full fare on the route. Punitive indeed.
Some might say this is a bit discriminatory, because when a fellow airline which also has the right to do it, then the penalty is not anything like this, it is just the difference in the fare. So the airline feels smug in that it has allowed someone else to set its pricing.
There are not that many business sectors that actually do that. In order to address the vast majority of people who want to search for a product, the numbers of searches per ticket now exceeds a ratio of 1000 to 1.
This is based on a low industry average of 400 looks to each segment booked and using 2.5 segments to the ticket). And that number continues to rise.
An airline ticket is not like a book, it is not fixed with a bar code. The low cost carriers have a different approach – they offer the fare that they think is appropriate at any time. They demand that each request which comes in is dealt with uniquely.
This is great when you have a simple product with no connections and nothing other than a one way or a round trip fare to deal with. A legacy carrierm however, has a magnitude of extra complexity.
There are a significantly greater number of products and prices that are possible as a result of the complexity of network carriers. Despite the fact that most people still take simple out and back trips, the rules are byzantine in their complexity. And all because the airlines want to hide the true pricing of the product. Indeed, airline pricing may be the ultimate consumer game!
So, for an online search that wants to be neutral across all possible channels and suppliers, there is no easy way to do it. The possible results are an iceberg of information.
If you ask the GDSs, they will probably say are constrained in what they can report by some simple constraints inside the structure of the fare system combined with the availability system.
Even advanced fare and availability search systems such as ITA Software or Everbread cannot give the possible answers all in a reasonable time without an incredible waste of processing. Essentially if one is a purist, then the answers must be thrown away as soon as they are served up. They have aged and the next person might get a totally different result.
So, enter the requirement for personalization. The airline wants to know everyone who is requesting fare information, by every channel, so that it can have pricing protection and parity on the channels where it chooses to operate.
And, actually, I don’t fault them for wanting this. But the result is that there is no way that anyone or any machine can ask the question and get a reasonable answer in real time to: “Show me the lowest fare by parameter for all possible choices across all channels – please?”
So now we have a real conundrum. The OTAs can pass data about the request to the airline, but it would slow down the process. I would hazard it would slow the results to a crawl and we could not get a result for the customer in under, say, 15 seconds.
This is not a guess, it is based on some hard data. It would also raise the cost for each search to around $1 per search. And if you use the number above this would be a cool $1,000 per ticket. Even if you reduce that number, cost-per-search to $0.01, then we are dealing with a $10 charge per ticket. That would be unacceptable.
So, now you see the dilemma - the cost in time and hard cash for the provision of the service is too costly. This is not a good thing.
And now you can see the war between search and personalization is not going to go away, and it will not get any better than the processes we get today. There is no right answer.
But we had better do a better job of being honest and truthful to the consumer or the big bad wolf will come and eat you all up. And whether you are supplier or an intermediary/seller it doesn’t matter. Both of you can be roadkill.