Why travel prices fluctuate

Have you ever sat on a plane next to someone who paid considerably less (or more) than you did for your ticket?  

What about a trip?  Have you scored a fabulous deal while your friends had to max out their credit cards because they decided to wait a few weeks before committing to go with you?

Travel pricing is a convoluted mess, but I’m feeling brave today and am going to try to explain it.

First of all, travel is a supply and demand business.  That’s the #1 factor when it comes to pricing.  

The #2 factor is “what the market will bear”.  If people will pay $400 a night, then that’s what the resort or airline will charge, no matter that they only need to charge $150 per night to be profitable.

Back in 2005 when I opened The Joy of Travel it was common practice for airlines, cruise ships, resorts etc. to implement “last minute” deals to fill unsold seats/rooms/cabins.  It took them a few years to figure out that pattern was causing not only a high volume of consumer complaints but also prevented them from accurately projecting and predicting their finances.  It was a mess for everyone concerned.

That practice has now pretty much stopped.  The travel industry suppliers got smart and decided to reward customers who will commit to them early with the best pricing.  Seems like common sense to me, I’m glad they finally did it.  

The fly in the ointment is they spent years training and rewarding the consumer to wait until the last minute.  That same well-trained consumer is now taking a hit right in the checkbook for doing what they’ve always done-wait. 

Now that you have some background info you’re ready to discuss the current pricing structure for travel-it’s called dynamic pricing.  

Let’s say an all-inclusive resort has 500 rooms.  It’s August 2016 and they have established their rates through July 2017.  They are going to allow the first 100 rooms for bookings in July 2017 to be sold for $150 per night per person.  After those 100 rooms are sold, the next 100 rooms are going to be offered for $175 per night per person, and so on.

As the supply decreases the price increases.  Dynamic pricing is dynamic-it changes as availability and demand change.

It’s the same with the airlines, cruise lines, etc.  As supply decreases, price increases, so it’s always best to buy when supply is great and demand is low.  If you wait until 30 days before your trip you’re usually going to pay a higher price than you would have paid 6 months out, you’re going to have less room options and less flight choices.  

Waiting is not good-it not only costs you money, it also costs you choices.  The best rooms (least expensive) and flights sell out first, always.  

I hope this helps you understand the travel pricing dilemma we face every day.  You also now understand why I plan our group trips so far in advance-to secure the best choices and prices.

Please help us help you get the most bang for your buck and begin talking to us as early as possible about your next vacation.