How much will your vacation really cost? The scourge of dynamic pricing is spreading like wildfire

12.07.2024 - 14:31 / thepointsguy.com / Delta Skymiles / Henry Harteveldt

JetBlue set off a firestorm earlier this year when the airline announced it would begin dynamically pricing baggage fees. A first checked bag costs $45 for "off-peak" flights and $50 during "peak" days and times. For a second checked bag, the fee can jump to as much as $70, and prices are even higher if you book within 24 hours of a flight. Plus, JetBlue has already raised the cost of checked bags a few times this year.

From restaurants to ride-hailing services, dynamic pricing (or surge pricing) seems to be spreading like a plague across the travel landscape. Dynamically priced mileage reward redemptions have long been the norm, but now off-peak and peak pricing has spread to other integral parts of the travel experience as well, with JetBlue being the most recent example.

"Dynamic pricing reflects a fundamental of economics — supply and demand," said Henry Harteveldt, president of the Atmosphere Research Group, a travel industry market research and advisory firm. "An airline may have a finite amount of product, so the airline may raise prices."

Harteveldt says he expects to see dynamic pricing become an even larger issue for travelers in the future. "The downside to dynamic pricing is that the consumer doesn't know what it's going to cost," he says. "One day it may cost $30 and another day $45 and some other time $15. What's unfortunate is that the travel is an afterthought. Airlines are not thinking about the consumer as they make these decisions."

Here's where we are already seeing dynamic pricing in action and where it might show up next.

Ride-hailing apps' business models are all based on dynamic pricing. The more demand there is, the higher prices will be. Theoretically, higher prices will encourage more drivers to log in and work. You're more likely to encounter surge pricing during severe weather or popular events (such as a concert) when driving in a certain area may be difficult or crowded.

In my opinion, Uber, Lyft and even Revel have all gotten better at making fares as high as possible without pushing customers away. When I land at New York-area airports, I often check all three apps to see which might be cheaper. Oftentimes, their prices are within just a few dollars of each other.

Now, non-ride-hailing businesses are looking to copy and capitalize upon this model.

As you undoubtedly have noticed, many airlines have gone fully dynamic with award pricing, and these days, award prices closely match cash prices. This is particularly true with Delta Air Lines. Getting more than a penny per mile in value with award redemptions at Delta is rare.

Related: Dynamic airline award pricing is out of control — here are some ways to beat it

Delta SkyMiles was the first major program to ditch award