It’s Tuesday evening and I have an announcement! The Miles Professor has been around since early 2013 and it’s been a great year and nine months for the site. While I’ve shared my miles using ideas, my trips, my tricks, it’s pretty much all been from my point of view up until now. I’ve been thinking lately of ways to offer a new perspective and diversify content, particularly with some different analysis and some writing more relevant to business travel and family travel sprinkled in. That’s why I contacted my friend Michael to see if he’d be interested in working with us. Luckily, the answer was yes!
I am happy to welcome Michael and here is his very first article:
Last week, the Wall Street Journal’s Scott McCartney, who is normally quite reliable, wrote an article about the best day to buy airline tickets. He did this by working with a ticket processor and analyzing which days of the week sold tickets with the highest and lowest fares. Based on his data, Saturday turned out to be the cheapest day to buy, at an average of $432 per ticket. Weekdays were all pretty much the same, around $500 each. His theory is that airline executives come into the office on Monday morning looking to raise prices. But he makes a glaring error that I will get to later, and misses the truth: There is no best day to buy tickets. But first, a bit on the science of pricing tickets known as “yield management.”
It often appears that airfares are determined by a sadistic random number generator. After all, why should a ticket from Boston to New York cost twice as much as a ticket from Boston to West Palm Beach, even though the latter trip is five times as long as the former? Anyone who has read the hilarious story about selling paint like airline tickets would agree: The airlines take a thousand monkeys and put them in front of a thousand typewriters, then throw darts to determine which monkey goes with which destination.
In fact, yield management people often have advanced degrees in mathematics or computer science and are experts at squeezing every last penny out of you that they can. Yield management became popular after airline deregulation in 1978, since carriers were no longer restricted to certain fares on certain routes. Instead, they began to measure supply and demand, with high-demand cities and popular times of the year getting higher prices than low-demand travel, regardless of distance (which is why that Boston-New York trip, heavy among business travelers, can cost more than the trip to Florida). It’s also why a flight that you’re taking tomorrow is more expensive than the same flight a month from now. The airline figures that if you’re booking at the last minute, you really have to go.
Over time, revenue management systems became more sophisticated. Not only did they have more data to work with but they also began to parse the data differently. Computers (and analysts) can make adjustments for holidays, school calendars and even sporting events. For example, if revenue managers based their decisions on past travel patterns, flights between San Francisco and Kansas City would have been relatively cheap in the last couple of weeks of October. But the airlines knew that travel this year would increase greatly, due to the World Series, so they raised prices. One European airline executive told me that they have somebody watch soccer (excuse me, football) games during tournaments so they can immediately raise prices when one team wins and its fans will have to travel!
So let’s go back to Mr. McCartney (Scott, not Paul). His thesis, that airlines raise prices on Mondays is simply wrong. They may or may not raise prices on Mondays (or Tuesdays, or Wednesdays, or any day that ends in –y…), but that isn’t the reason that weekday tickets are more expensive than weekend tickets. It’s not about when people are buying the tickets, but rather, who those people are. In general, business travelers are willing to pay more for a ticket than leisure travelers. Business travelers need flexibility, often need to leave at the last minute and, most importantly, are paying with Other People’s Money. On the other hand, individuals booking vacations are generally more flexible, book farther in advance and use their own cash. Guess who the airline is going to ding for the higher fare? And since business travelers generally book their tickets during the work week, average fares are naturally going to be higher.