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.
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.