Like so many travelers, Oren Etzioni was confounded by the mysterious spikes and dips in airline fares. Etzioni, a computer science professor at the University of Washington, applied his programming skills to track them, and found fares could fluctuate by over $1,000. “Over a 21-day period, prices were changing six or seven times,” Etzioni says.
Airline fares’ volatile nature isn’t necessarily meant to keep customers guessing —- but it doesn’t hurt the airlines, either. Ever-shifting prices mean only a select few passengers will get the best deal. If you happen to be the traveler looking for the lowest price, trying to comprehend the ever-shifting fare structures can prove an exercise in frustration.
When you log in or call up for ticket prices, there’s no indication where in the fare range you’ll be dipping in. A fare quote might sound especially low or high, but what are you comparing it to? Because fares fluctuate wildly, there are few ways to figure out whether today’s great deal will be next week’s rip-off — except to price-shop until your mouse button is worn out.
“The more work you do, the farther out you do it, the better opportunity you have to put more money in the bank,” says Tom Parsons, founder of Bestfares.com. “I think those people who ... just think one Web site’s better than another are just shooting themselves in the foot.”
The hunt for airfares is like a game of Stratego — neither side can see what they’re up against until after they’ve made their move. Airlines expect consumers to act one of two ways: either to buy early, which allows carriers to gauge demand for flights, or to wait til the last minute, which allows them to charge stratospheric full fares.
Travelers want both flexibility and savings, of course, which requires a peek on the other side to see where fares are headed.
That wisdom used to come from travel agents, who regularly checked prices and knew the little quirks of fare fluctuations. But since 1995, agents had far less incentive to hunt down airfare deals after the airlines began to cut commissions. That, and the proliferation of online travel sites, has led travelers to pick up the task, no matter how time consuming.
Dub Ashton, who teaches about transportation and consumer marketing at the University of Arkansas, puts it another way. Consider the three types of airline ticket purchasers: the traveler who frequents the same route and knows exactly how to shop for a ticket on it; the traveler who flies on different routes but has price-shopping experience; and the “new buy” traveler, who doesn’t fly frequently and isn’t aware of price swings. The new-buy passenger usually ends up with the short end of the stick.
“It’s kind of like someone buying a car,” Ashton says. “If you haven’t bought a car before, you think you have to pay the price on the window.”
Only those who fly often enough to gain familiarity with the market, truly get to peek at the other side’s lineup. And everyone else? “The best advice that I could give a leisure traveler is to act like you go there every week.” says Bob Harrell, president of airfare consultancy Harrell Associates.
If you travel every week, “you know what the fares are,” says Harrell, who ran American Express’ airfare management unit and spent 15 years at Pan Am. But that’s a lot to ask of the occasional traveler.
Harrell might have an alternate solution. He collects data for the top 20 domestic U.S. routes among the largest seven airlines to analyze route costs for airline investors. But that data, he reasons, could be a gold mine for the bargain-hunting traveler. He is currently considering whether to expand his data and build a commercial service.
His method of comparison is very much like the 52-week ranges used to measure stock performance. For any given route, he measures ticket prices each week and ranks them against the average prices of the previous year.
For example, an American Airlines flight from Chicago to Dallas at the end of April cost $89 one way as part of a round-trip leisure fare. That ranked in the lowest 20 percent of fares over the past year, which bottomed at $79 last July and peaked at $133 in March. The same week, a similar ticket on American from New York to San Francisco cost $160, within the top 20 percent; a similar Northwest ticket from Detroit to Los Angeles cost $119, nearly 60 percent of the maximum fare.
With a full set of data, airfares could be ranked according to their reported ticket prices, letting consumers know the real value behind their fare deal. Harrell believes consumers might pay a small fee to have their airfares ranked before they buy. His method serves as a valuable gauge of current prices, though it won’t tell you whether you should wait for a better fare.
FORECASTING THE FARES
Etzioni had a similar idea, but wanted to answer the other half of the question. He relied on computer skills to find patterns in the never-ending fare fluctuations and use those patterns to predict the optimal time to buy.
He and researchers at the University of Southern California developed a digital travel adviser called Hamlet. (The name was devised when they paraphrased Shakespeare: “To buy or not to buy? That is the question.”) Hamlet collects actual fare prices over time, then uses algorithms to make a mathematic best guess when the lowest price will next appear.
“What we found, contrary to popular belief, is that there’s method in the madness,” Etzioni says, again paraphrasing the Bard. “With good probability it can predict: Should you buy or should you wait?”
During a 41-day test, Hamlet saved nearly $284,000 for 607 simulated passengers. When it did save someone money, they saved an average of 27 percent off a ticket.
Behind those numbers, though, lay more modest success: The system often couldn’t save a passenger any money. It wasn’t that the algorithms were inaccurate; Hamlet’s could predict the lowest fares with almost 90 percent accuracy. But most passengers wanted to buy when the best fares weren’t available.
And there’s the rub — three-quarters of the time, Hamlet was stymied because passengers bought too late in the pricing cycle to get any savings, usually within a week of their flight.
Assuming you have enough time to fare-shop, you’ll need to decide how much time you’re willing to invest. Business travelers usually want a minimum of hassle, but most leisure — “discretionary,” in business-speak — travelers see air travel as a larger experience: they want to carefully plan flights, kibbitz with airline staff, enjoy all those little increasingly rare perks. The hunt for a primo fare hinges on what Parsons calls “the thrill of the kill,” which also explains why Ashton describes bargain hunting as a form of entertainment, something with residual value to the buyer even if it’s time-consuming.
“The real value of their dollar has gone up because they’ve spent the time to find that value,” he says. “Generally speaking, discretionary passengers don’t look at their time as being valuable.”
That sense of beating the system is reinforced by the fact that it’s simply impossible for everyone to get the best fare. Multi-tiered pricing is meant to distribute the costs of a flight among various types of passengers, and airlines quickly juggle their fare structures to counter any sudden shift in buying patterns.
Thus it’s almost impossible for you to score a great price every time, unless you can fly whenever or just won’t go if it’s too much money. Parsons offers a relatively simple rule of thumb for figuring out the best deals: Divide the ticket cost into the total miles of the flight — round trip, if that’s what you purchased — to determine the cost per mile of your ticket.
Parsons estimates 7 to 8 cents per mile for a 1,000-mile domestic flight will be a decent bargain. A discount airline like JetBlue spends about 6 cents per mile for each passenger; a major airline averages over 10 cents.
Bargains, the experts say, will become more scarce with the airlines struggling to stay afloat. The hunt for revenue has them shuffling their game pieces, tightening fare structures and cutting flights. But both sides can play. Etzioni, who’s hoping to license Hamlet to commercial travel sites, designed its formulas to recalculate rules so fast that even an industry-transforming event on the scale of 9/11 would only take a few days to factor in. It won’t guarantee more winners, but it might make consumers less scared to play.
“If you can increase peoples’ confidence that they’re getting a good deal ,” Etzioni says, “that might be a really good thing for the industry.”