The airlines remain the masters of the cat-and-mouse game of revenue management. They are using sophisticated ways to adjust airfare pricing based on your desire to travel and how much they believe you are willing to pay. Take one Hawaii-centric airline in particular, Southwest, which just announced some of its latest progress in revenue management like Alaska did earlier.
Beat of Hawaii reported paying surprisingly high airfares from Hawaii on Southwest this summer on flights with only a couple of weeks’ notice. And now we know a bit more about just why that happened. We also paid a high price to return to Hawaii in December, but bet on the right side of that one, inasmuch as the price has since gone up by 54%.
At the recent Laguna Conference sponsored by Morgan Stanley, Southwest announced, “We’ve also put in a new revenue management system and are very, very pleased with the performance of the system.” That from company CEO Bob Jordan.
In particular, Southwest is looking at opportunities to raise prices for travel that isn’t planned far in advance.
Jordan was reported to have said, “The old system sort of worked to fill up a flight.” But, “the new system really works to manage across all itineraries, and it works to manage and build to a maximum revenue number.”
The fruition of revenue management for Southwest Hawaii flights will come in 2024.
Speaking about the new system, Jordan said it will take some time before it learns from all the available data. In terms that are somewhat more palatable to the public, he said that next year, “we have the opportunity to really continue to mature the revenue management system as well and continue to drive benefit from that initiative.”
In traveler speak, be prepared for higher prices on flights to Hawaii, perhaps much higher.
Old-fashioned cookies became high-tech dynamic pricing for Hawaii travel.
Cookies represent your individual data, while dynamic pricing takes it to a whole other level. Beyond even basic dynamic pricing is continuous dynamic pricing. That is the real-time adjustment of prices using contextual signals and artificial intelligence. IATA calls it “Dynamic Offers.”
Airlines know what we are looking for and when, and it doesn’t matter what device or browser you use. This information empowers prices to go up and down throughout the day relative to individual and group demand. It also allows airlines to customize offers to each of us in real time.
Contextual signalling yielding higher Hawaii airfares.
Airlines no longer have single prices for Hawaii flights. They’ve implemented high-tech products such as Architect that help them to refine “revenue management” and create optimal pricing.
Alaska Airlines, like Southwest, moved to sophisticated dynamic pricing and is using the “Architect” dynamic modeling tool. Airlines also now spend less time while simultaneously being far more effective in driving higher fares using these tools. And these airlines aren’t alone, it is every airline, and we are sharing details as we learn more about what each one is doing.
Alaska Airlines’ revenue manager Kirsten Amrine said when they announced Architect, “When ATPCO showed us the capabilities of Architect, we saw a clear vision… Architect’s capabilities enable us to be even more strategic… to unlock the full revenue potential of our network and pricing strategy.”
Dynamic pricing means higher-priced Hawaii flights.
There is still competition, and that’s great for us consumers. To and from Hawaii, we see that in those markets that still have the “Southwest Effect, for example” Those markets are where the best prices are to be found, no matter the airline.
Hawaii flights – dynamic pricing and now offers.
Dynamic pricing tools like Southwest’s or Alaska’s Architect allow airlines to analyze constantly, using changing, actionable data to create “granular pricing.” These tools are now integral to not only airlines but also hotels, vacation rentals, and car rentals and are considered essential to being competitive and driving profitability. This is largely without exception. Thus, the price of a Hawaii flight is always in flux as airlines evaluate competitors’ pricing, events, and spikes in interest, together with our searching and booking patterns, to determine and show us a price. As airlines put this all together, the next step is the offers part, packaging everything possible.
Extra charges are also dynamically priced.
The airlines reap more than $50 billion a year on extras like baggage, seat selection/early boarding, etc. Those costs are no longer fixed either and are variably priced. While dynamic pricing of extras is newer than on airfares, that too is here to stay.
Guess why airlines went cashless?
Or why Delta makes you have a SkyMiles account to access their free WiFi. As we said previously, “Remember that airlines went cashless for more reasons than you think. Your onboard purchases give them yet further insight into your behavior and preferences.”
Things for Hawaii travelers to keep in mind.
- Know what dynamic pricing is so you can plan accordingly. Don’t expect to return to find yesterday’s prices tomorrow.
- Understand that this is becoming more sophisticated all the time. You might want to avoid Basic Economy fares that are restrictive and not changeable. That way, if you should find a better fare later, you have more options to change.
- For now, airlines, including Southwest, are still working out the kinks. More to be revealed later.
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Anyone have any idea why Alaska currently only offers non stop flights on Saturdays??
It limits days or travel, rentals, etc. Unless you want to fly for up to 10 hours instead of 5. We lost a companion flight because our condo dates were not Saturday to Saturday. Makes no sense.
Basic economics here. Hawaii told consumers to stay home they weren’t wanted. So they changed travel plans to go where their tourist dollars were wanted. Planes flew empty and so routes were cut. Every airline does this to every destination. It’s supply and demand. Perhaps Hawaii should stop telling visitors to stay home. Or is that exactly what the end game is intended to be? Only the rich can afford to visit.
I see what you did there.
You reacted to an article describing multiple-airline new pricing tactics that are being applied in all US markets (not just Hawaii) by posting an anti-Hawaii rant.
Nicely done.
It is cheaper to just stay home. All this dynamic pricing stuff stinks.
Hawaiian Air issued 2 vouchers at Honolulu airport inJune. Sent all info with supporting docs. No voucher support provided so cannot access for travel yet required to have travel plans set within 12 months of issue.
Fabulous people, horrible system. Is there anyone in charge of vouchers? No access to decision making admin. . Told to ‘just wait’ as months tick by. ‘They are working on it”.
Can you help?
Janis
Hi Janis.
Have you tried reaching out to their executive office? That’s what we suggest as a start.
Aloha.
“omg” … wish I’d read this weeks ago! “Strange” I thought when looking in early August for Christmas family tickets to Kona from the midwest. Within 10 days, American Airlines had doubled ticket prices from just over $1G to just over $2G per ticket. Likely they had tracked my computer searches by doing exactly as you described in this article. “Buyer Beware” therefore!
There was a time flying was fun.
Architect is Artificial Intelligence (AI) used against the consumer.
AI has been used by airlines, car rental agencies, hotels, etc.. for a long time to a lesser level of sophistication.
It is not new, it is just much more sophisticated and you the consumer will feel you are being abused by the airlines, etc.
I use to teach the concepts and application of gaming and queing theories with computers back in the 60s and 70s, designed its implementation for civilian companies and the military, and dreaded the day of it’s use against the consumer. Artificial Intelligence as a gaming tool against consumers collectively and individually is not a good thing.
Kevin,
Thanks a lot for sharing that! That explains a lot!
Ouch!
How will those who live on the islands ever be able to travel or visit loved ones off-island?
The Financial Times had an excellent article on “surge pricing,” and how it will be “everywhere.” They detailed how London bars and pubs are now using surge pricing for cocktails. That’s right — U.K. bars are “surge pricing” drinks during evenings and weekends.
This article outlines how it’s impacting airline ticket pricing. And it’s everywhere in the entertainment space: hotels, rental cars, concerts and sporting events, etc.
The more surge pricing there is, the more we pull back.
Higher airfares. Who would have guessed that. My guess is less tourists. For locals too expensive to live and now what too expensive to leave. Just heard on the news don’t dig in the ash there are toxins below the surface. Seems like the negatives are out weighing the positives lately.
No matter what they call it or “blame” it on, The greed Always creates the need”!
It would be nice if the airline would give a partial refund. Since we are not flying to Maui from Oahu. We were told we had to cancel the “entire” booking and rebook, but that we were not guaranteed the same flight ,times, or seats. We are staying in Oahu after the governor of Maui asked not to come at this time. The airline is keeping almost 600 for the unused flight. This is not right. We didn’t want to cancel but had to because of the fire.