Are dynamic bundles personalization?
A preview of Phocuswright's latest research report Dynamic, Continuous and Bundled Pricing: Options and Offers in Air Distribution
There has been significant hype over the years around the need to personalize travel offerings. In fact, NDC is often thought of as the underlying technology necessary to personalize air choices. This personalization through NDC has typically taken the form of bundles that combine price with ancillaries (e.g., premium seat, early boarding, free Wi-Fi). Today, most airlines admit that they are unable to personalize offers to individuals, but instead create like-minded groups for their offers.
The evolution towards personalized pricing would require some underlying changes to the way personal profiles are created, stored and interact with the booking process. Much of this may develop with the realization of Self-Sovereign Identity, which allows consumers to control their own profiles across multiple suppliers and retailers, enabling specific access to information to get better offerings. For example, a traveler who has high status with Airline A could opt to share that status information from their SSI profile with Airline B to get a better offer.
This is a preview of Phocuswright's travel research report Dynamic, Continuous and Bundled Pricing: Options and Offers in Air Distribution.
Impact on the Lowest Logical Fare
Did you get a good deal? This is a common question posed by friends and relatives around airline ticket purchases. Whether traveling for business or leisure, wanting to get the lowest fare based on your requirements is a key goal for many travelers; but what is the lowest fare when prices and bundles are generated dynamically?
An analogy can be found in customized clothing: If a pair of pants is created specifically for your measurements, but costs more than off-the-shelf alternatives, paying more for this personalization may be considered a reasonable extra expense. Of course, airlines are unable to customize seat pitches and widths for individual customers, but choosing a premium cabin may serve a similar purpose. The opposite exists today with Basic Economy fares, where passengers consciously choose a narrow seat, lower boarding priority and limits on luggage to obtain the cheapest fare. In this sense, dynamic bundles and continuous pricing should help the industry move toward more customized offers, while true personalization will require greater insight into the customer’s personal preferences.
The use of Artificial Intelligence (AI) by the airlines will likely further fuel the effort toward true personalization. With the vast amount of data collected by the airlines on passenger behavior – particularly loyalty members – AI in the form of machine learning will likely play a role in driving more personalized offers based on past behavior and preferences.
With the drum beat about personalization intensifying, especially with advances in AI, continuous, dynamic and unique bundled pricing seems well positioned to usher in a new era of customized travel. These initiatives enable airlines to better differentiate their products and prices to meet customer needs.
True personalized pricing will only emerge when preferences are clearly articulated, something that may be facilitated with the adoption of Generative AI. Given that the format of platforms like ChatGPT is conversational, it has the potential to tease out preferences that might not be captured in a traditional booking engine. Booking systems could use this information to assemble flight attributes that best meet the traveler’s needs. On the backend of the equation – at the airline pricing layer – AI also may facilitate better personalization.
Soon the question, “Did you get the cheapest fare?” may be replaced by, “Did you get the best value for your money?” These developments should be monitored closely, as any effort to dynamically alter prices will likely have ripple effects across all stakeholders in the industry.
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