It’s not news that data and technology are competitive differentiators in travel. One such area where AI and machine learning are causing significant disruption is in shaping pricing and discounting strategies. By optimizing these processes, travel companies can improve their profitability, reduce opportunity loss, and potentially offer more personalized pricing to customers (legal constraints notwithstanding). Dynamic pricing and discounting can help travel companies optimize their revenue by adjusting prices based on demand, seasonality, and other factors.

Dynamic pricing is a strategy where organizations can adjust prices in real time based on demand and other factors. Revenue management involves setting of prices based on various factors to maximize revenue at its core. This approach has been used in industries such as airlines and hotels for years, but with the advent of machine learning, it is now possible to achieve near real-time dynamic pricing. Machine Learning (ML) algorithms can analyze vast amounts of data to determine the optimal price for a particular product or service. This data can include historical sales-related information, competitor pricing, customer behavior, and external factors such as weather, holidays, and events happening in the vicinity. Travel companies need to make business decisions on which products they want to dynamically price and at what frequency they want the price to change – this will help determine the right technology solution and derive more value.

Machine learning algorithms can also help travel companies automate their discounting strategies to determine the optimal discount rate and maximize revenue. By automating pricing and discounting strategies using AI and machine learning, travel companies can:

  1. Improve profitability: Optimize revenue by charging the right price at the right time.
  2. Reduce opportunity loss: Reduce the opportunity loss that results from having unsold inventory.
  3. Personalize pricing: Offer tailored pricing to customers by bundling the right products, improving customer satisfaction and loyalty.
  4. Hone competitiveness: Offer pricing that is more responsive to market demand to stand out from competitors.

However, there are some potential risks associated with AI-based pricing and discounting. For example, if machine learning algorithms calibrated inaccurately may lead to pricing that is discriminatory or unfair. To mitigate these risks, travel companies must ensure their algorithms are transparent, auditable, and fair.

In conclusion, using AI and ML to automate pricing and discounting is fast becoming an essential part of the travel industry. By using these technologies, travel companies can improve their profitability, reduce opportunity losses, and offer more personalized pricing to customers while ensuring that pricing is fair and transparent. Tech4TH brings deep-rooted expertise and innovation into play in delivering the right pricing and discounting solutions to travel companies and enabling intelligent engagement with travelers. Write to us at reimagine@tech4th.com to know more.