No, this is not a promo for the World Wrestling Federation. It's
about software and how much you pay for a plane ticket.
When airlines and their fares were deregulated, American Airlines (a
technology leader) implemented software to squeeze every possible penny from
their passengers. The software is called Yield Management and is used by all
airlines, hotels and car rental companies.
Logic would tell you that if you wait long enough, the airline will
drop their prices because they would rather have some revenue for the seat
rather than none. That's the case for discretionary travel (cruises)
but not the case with required travel (business, family emergency).
Rather than mark-down the last four seats from New York to Los Angeles to
$200 each, the high cost airlines price them at $2,000 to catch the one traveler who must
take the trip. Result, more revenue. Here's the airline board
room logic: don't let the traveling
public ever believe that we (the airlines) will drop the fares at the last
minute or they'll all wait to make reservations at the last minute.
All of the full-service airlines founded prior to de-regulation have high
cost structures that require this level of revenue to survive thus they
all look as if acting in concert. The exception to Yield Management
logic is week-end specials which require a Saturday night stay and a
Monday or Tuesday return (not practical for business travel). The
other exception is opaque fares (Priceline or Hotwire) where the traveler
has no knowledge of the airline and very little say on the route and times of travel. Again, not
practical for business travel.
High cost airlines make money on the full
fare business traveler. Thus Yield
Management software is an absolute requirement for survival. If lots of seats are already
sold for flights three months out, the software raises the price on the
remaining seats. If there are not many seats sold for the flight, the
software may drop (or suggest) the prices for a few seats. There are
tens of thousands of price changes daily. It may also
make changes to the types of aircraft used. It's highly intelligent software.
Discretionary travelers really shop well. They plan far ahead and
spend money as if coming from their own pocket (it is). Required
travelers don't shop as diligently nor can they plan ahead. For this
flexibility, the required traveler expects to pay more.
Saving 10-20% on a leisure ticket is not nearly as much money as saving
the same percentage on a required travel ticket. Prior to 2000,
travelers were at the mercy of a good travel agent for finding low fares
unless you happened to live in a city with frequent service from Southwest
(or the like). Expedia, Travelocity and the airlines' web sites were
not well tuned to the tricks and techniques of digging out the lowest
fares with reasonable trade-offs as to time and convenience. If I
need to go from New York to Los Angeles on short notice, only a good
travel agent (or a very savvy traveler) would know how to connect in
Chicago Midway or from Seattle to Memphis to connect in Kansas City.
The same goes for alternate departure and destination cities (i.e. Ft.
Lauderdale vs. Miami or Oakland vs. San Francisco).
Things changed with the introduction of software and hardware that has very
powerful and fast searching capabilities. This software can put
together the alternatives and present them to the shopper in a very useful
matrix
format. The first (and best) supplier of this powerful software is
from a Boston, MA company called ITASoftware.
They have developed the perfect software weapon with which to battle Yield
Management software. ITASoftware has sold (or licensed) their
technology to Orbitz, America West and Delta Airlines (among others). The
customers of ITA are not required to use all of the tools nor present the
data in the same format but you can see the heritage of ITA in Orbitz's
product. The only way that a supplier like Orbitz or Delta can
succeed in a commodity type of business is to have lower prices and/or greater convenience. I
think we'll see a lot more travel suppliers offering ITA (or similar?)
tools to their shoppers.
The playing field is now level. Let the best warrior survive.
