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Fluid Pricing
9 October 2000

Do you like price manipulation sites? They allow you to do clever things with the price of the goods on sale. Take QXL, for example, the well known auction site or Priceline - the US "name your price" site. How about letsbuyit.com - the "let's club together and hammer the supplier" site?

Well, now for something completely different - savvio.com - a flight sales site newly launched in the USA. Search for a flight and you reach a price/availability display of the like that you will not have seen before. The prices are dynamic. As you watch, they are constantly reducing, 1/100th of a cent by 1/100th of a cent. There is also a timer showing how much time is left before the offer closes. You can also see how many seats are left. This is so exciting! Do you buy your flights at $525.1245 or do you make a cup of tea and then buy at $525.1199, risking the fact that others are drinking coffee which takes less time to brew and so may grab the last two seats before you?

Seriously though, it brought home to me that the online world and fluid pricing were made for each other. Of course, fluid pricing is a discipline that the travel industry has been practising for many a year. Tour operators manipulate non-brochured product prices, moving these up and down according to their notion of supply and demand. Airlines close out net fare classes if a flight is filling up. Hoteliers will often do a deal if they have empty rooms on the day. However, all this price manipulation is invisible to the consumer unless he/she puts the time in to track prices (or, for flights, subscribes to a fare tracking service).

What would the world of travel distribution be like if all travel was fluidly priced and price movements were as transparently obvious to the consumer as they are with the financial markets? What would travel agents do? Would they be reduced in number to a few large, online brokers who could afford the technology to develop travel broking systems, taking real-time price feeds from tour operators, airlines and other travel principals? Would consumers prefer to watch the prices tick direct on the principal's own online sites and just abandon using agents? Would more consumers hold off buying in the hope of falling prices in the lates market or would they think that they are better off buying early in low demand periods? 

You may be sitting there thinking such transparently fluid pricing could never happen. Fantasy land! However, it is the dream of many a travel principal to really excel in yield management, to maximise return on committed, perishable, inventory. There is considerable profit to be added to the bottom line by getting this right, by constantly shifting price according to supply, demand and competitor activity. And if there is money to be made, then I believe it will happen. It is just a question of who will be first in the UK.

Now, imagine a few years hence when we all have our 3G mobile phones which, of course, will be permanently connected to the Internet. Won't it be fun to sit on the train or bus, watching the price of your holiday drop before your eyes, then pressing that "Buy" button right at the bottom of the market? 

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