Optimizing Offers with Dynamic Pricing in Airlines & Travel

The aviation and travel industry is one of the most demanding sectors for price management. Volatile fuel costs, fluctuating exchange rates, seasonal demand, dynamic hotel rates, attraction fees, and occupancy levels create a complex web of dependencies that must be constantly monitored and optimized. Higson provides the travel industry with a solution that seamlessly integrates all these factors to shape offers precisely in real-time.

The Complexity of Pricing in Airlines & Travel

The Anatomy of Travel Pricing

Pricing a travel package or an airline ticket isn’t a simple margin calculation. It is the result of dozens of variables that change constantly — often by the hour. Understanding this complexity is the key to effective offer management.

Airline Price Components

An airline ticket consists of several moving parts:

• Base Fare: Dependent on route, booking class, and seat availability.
• Fuel Surcharges: Shifting alongside global oil prices.
• Airport Fees: Varying by port of departure and arrival.
• Taxes: VAT, environmental taxes, and government levies.
• Baggage Fees: Increasingly unbundled and priced separately.
• Seat Selection: Premium charges for preferred locations.
• Ancillary Services: Meals, priority boarding, and lounge access.

Hotel Price Components

A similar complexity defines lodging rates:

• Base Rate: Dependent on room type and category.
• Seasonality: Peak vs. off-peak pricing.
• Occupancy: Yield management that drives prices up as demand spikes.
• Length of Stay (LOS): Discounts for extended bookings.
• Meal Plans: Various tiers (BB, HB, FB, All-Inclusive).
• Add-ons: Spa services, parking, and late check-outs.
• Booking Channel: Divergent rates for OTAs, direct bookings, and tour operators.

Real-Time Market Dynamics

Unlike other sectors where prices remain relatively static, travel is characterized by extreme volatility driven by:

1. Supply and Demand: Seat availability, room vacancy, and upcoming events (concerts, conferences, sports).
2. Macroeconomics: Jet A-1 fuel prices, exchange rates, and inflation in destination countries.
3. Competition: Competitor carrier rates, OTA promos, and new route launches.
4. Seasonality: School breaks, holidays, and high/low season windows.

Challenges of the Traditional Approach

For years, the travel industry managed this complexity using static rate cards, manual corrections by revenue managers, and basic "if-then" rules. This approach has fundamental flaws:

• Slow Reaction Time: By the time a price change hits all systems, the market opportunity has often vanished.
• Risk of Error: Manual entry is prone to mistakes that can cost thousands in lost revenue.
• Limited Granularity: It is impossible for a human to account for every variable simultaneously.
• Inconsistency: Price discrepancies across channels lead to "channel conflict" and customer frustration.

Higson: The Dynamic Pricing Engine for Travel

Higson replaces rigid rate cards with a decision engine capable of calculating prices in real-time.

System Architecture

Higson for Travel is built on a multi-layer architecture:

• Input Layer: Pulls data from GDS/CRS (availability), Channel Managers (occupancy), and external APIs (fuel, weather, and FX).
• Business Logic Layer: Where users define base rules, modifiers, and margin safeguards.
• Calculation Layer: Computes the Optimal Price to maximize revenue or the Minimum Price to guarantee profitability.
• Distribution Layer: Automatically propagates rates to direct websites, OTAs (Booking.com, Expedia), and Metasearch engines (Google Flights, Kayak).

Key Features for Airlines & Travel

Dynamic Airline Pricing

Higson enables advanced Revenue Management by controlling booking class "buckets" based on load factor and historical patterns. It also allows for:

• Dynamic Surcharges: Automatically adjusting fuel or currency surcharges.
• Ancillary Pricing: Optimizing fees for bags and seats based on passenger profile and time-to-departure.

Hotel Yield Management

• Auto-Rate Adjustments: Raising rates as occupancy grows or triggering last-minute deals for vacant rooms.
• LOS Management: Setting "Minimum Stay" rules during peak events.
• Rate Parity: Ensuring consistency across channels while allowing exclusive "Direct-Only" offers.

Dynamic Packaging

One of Higson’s most powerful features is Real-time Package Pricing. It sums the current flight, hotel, and transfer costs in milliseconds, presenting the customer with a live, bookable price — not an estimate that might change at checkout.

Business Benefits

Benefit Impact Revenue Growth 5–15% increase in yield per available seat/room. OPEX Reduction Automation allows revenue managers to focus on strategy, not manual data entry. Competitive Edge React to competitor moves in minutes, not days. Better CX Price transparency and personalized offers based on loyalty status.

Use Cases

• Low-Cost Carriers (LCC): Using Higson to differentiate prices between direct and OTA channels, resulting in a 12% RASK (Revenue per Available Seat Kilometer) increase.
• Resort Groups: Managing rate parity and dynamic "Room + Spa" bundles, leading to an 8% RevPAR (Revenue Per Available Room) growth.
• Online Travel Agencies (OTA): Reducing price management time by 20% while increasing margins through automated repricing.

The Future: Hyper-Personalization and AI

The market is moving toward a "Real-time Everything" model. Higson is ready for:

• Individualized Pricing: Offers based on search context, device, and Willingness to Pay.
• AI Integration: Utilizing predictive algorithms to forecast demand spikes before they happen.
• Regulatory Compliance: Ensuring dynamic pricing remains transparent and fair.

Summary

In a world where price is the ultimate tie-breaker for travelers, the ability to shape it intelligently is the foundation of business success. Higson gives airlines, hotels, and tour operators the tools to not just keep pace with the market, but to lead it.