Unlocking the secrets of hyperdynamic pricing

How the travel industry uses AI and how consumers can benefit

Last month, as summer travel season heated up, our Global Head of AI and Data, Angela Zutavern, was interviewed on NBC’s The Today Show on the use of AI and “hyperdynamic pricing” in the travel industry. In this segment, Angela shared AlixPartners’ analysis of hyperdynamic pricing in the U.S. airline and hotel industry, uncovering common pricing patterns that attentive consumers can use to get the best deals.

Hyperdynamic pricing

Hyperdynamic pricing is an AI-driven pricing strategy that companies use to adjust prices, based on real-time market conditions. The strategy relies on the ability to gather, store, and process extremely large amounts of data – something that previously only the very largest companies with sophisticated data science and computational capabilities could do. 

However, thanks to the proliferation of affordable cloud-based technologies over the past five years, it’s now possible for businesses of all sizes to implement AI-driven hyperdynamic pricing. 

Airlines and hotels commonly use hyperdynamic pricing to automatically adjust fares intraday – sometimes multiple times per hour – in response to real-time and anticipated changes in supply and demand. Sophisticated AI models track consumer behavior patterns across massive datasets, allowing companies to maximize revenue by pricing their services and products competitively. Consumers can take advantage of hyperdynamic pricing by following patterns and knowing when prices drop. 

AlixPartners’ Angela Zutavern on NBC’s The Today Show discussing how the travel industry uses AI and hyperdynamic pricing to automatically adjust intraday pricing based on consumer demand. Watch the interview here.

How consumers can use hyperdynamic pricing to their advantage

AlixPartners analyzed the use of hyperdynamic pricing in the U.S. airline and hotel industry to uncover the common pricing patterns and optimal timing for when consumers are most likely to get the best deals. This analysis employed machine learning techniques to identify patterns and clusters, drawing insights from huge datasets comprising millions of airline fares and hotel room rates.

As Angela shares on The Today Show, the key is to shop when other consumers are not shopping. In the U.S., consumers typically see the best deals for both airfare and hotels early in the morning (before 10:00 am). Not only are fewer people shopping then, but lower than expected demand from the previous day could also drive prices down. In some cases, airfare rates dropped by as much as $700 and hotel rates by $400 per night. 

The most expensive time of day to shop for airfares is from 10:00 am to 1:00 pm and 1:00 pm to 3:00 pm for standard hotels. For luxury hotels, however, it’s best to plan far in advance. Luxury hotels had the best deals on average 30 or more days before arrival with significantly fewer discounts in the 7 to 14 days before arrival. 

AI will increasingly become more common in our everyday lives. Consumers who are able to understand how AI-driven hyperdynamic pricing works have the best chance of finding the best deals. However, AI models are constantly learning and improving so the patterns they identify will also change over time.