AI Travel Pricing Is Here: How Airlines and Hotels Could Quietly Raise Your Rates

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Speaker 1 Rules and restrictions apply.

Speaker 3 Think your flight was expensive? It might have been custom tailored to you.

Speaker 1 Something tells me this isn't necessarily the customized experience I look for when I travel.

Speaker 3 Eek, no, Tess, not at all. As it turns out, travel companies are using AI to predict exactly what you're willing to pay and then charge it.

Speaker 3 On this episode, we have advice on how to fight or flight back.

Speaker 1 Welcome to Smart Travel, a deep dive into the tips, tools, and tactics to maximize your travel dollars. I'm Tess Viglund and for Megan Coyle.

Speaker 3 And I'm Sally French.

Speaker 1 And we are the travel nerds ready to help you plan your next big trip. And today we're talking about how AI may be helping travel companies plan how to charge you more.

Speaker 3 That is after today's news. But first, our disclaimer, and that is that we will talk about a few credit card companies that are Nero Partners in this episode.

Speaker 3 Of course, that does not influence how we discuss them. The benefits, terms, and fees mentioned were accurate at the time of posting, but things can change.

Speaker 3 Some offers may have expired by the time you're listening, so for the latest details, follow the links in the episode description.

Speaker 3 Even though we are more than a week out from Thanksgiving and nearly two weeks out from Travel Tuesday, it seems the holiday deals keep coming earlier and earlier every year.

Speaker 1 Oh, Sally, I mean, it's almost Easter.

Speaker 3 I was just shocked when I saw a Christmas tree out before Halloween.

Speaker 1 Oh, I know. Christmas trees come out in August, I swear.

Speaker 3 Luckily, the good news, though, is that the people out there really have a lot of time now to actually compare those deals and plan out their travels.

Speaker 3 I almost feel too much stressed when I see a deal that I learn about that day and then I know it's going to expire that day.

Speaker 1 Same, same. And your team is rounding up all the NerdWallet approved deals, right?

Speaker 3 Well, I really should say it is our wonderful colleague, Craig Joseph. He built this amazing page, which shares any deals we here at NerdWallet approve of.

Speaker 1 And we'll make sure to put a link to that in the episode description. But any standouts for you?

Speaker 3 You know, lots of luxury properties going on sale. Hyatt is offering up to 30% off to World of Hyatt members for hotels booked between now and December 11th.

Speaker 3 That's for stays between now and April 30th. Interestingly, Tess, the discounts are lower if you are a non-member.

Speaker 1 So maybe join World of Hyatt to get the full discount because it's free.

Speaker 3 Definitely incentive to join. Hand over your email is the only cost there.
Now, many of the biggest deals we are seeing are at Hyatt's luxury properties, as you mentioned.

Speaker 3 So these are places like Grand Hyatt Deer Valley in Park City, Utah. That's a good one.
It has direct access to the ski slopes. There's one of my favorites.
That's the Ondaz Maui at Wailea Resort.

Speaker 3 I stayed there many, many years ago ago and need to go back. I had Hyatt Elite status simply by holding the World of Hyatt credit card.

Speaker 3 And just through that test, I got upgraded to a room with its own private pool. Also another good one on sale.

Speaker 1 That sounds so nice right now as it's pouring rain here in Portland.

Speaker 3 I love that melee colleague Maka Christmas. So totally, totally want to book that one.
Another good warm destination on sale, Hyatt's Alila Maya Coba in Playa del Carmen.

Speaker 3 This one actually is not open yet, but it is set to open next year. So book now to snag those deals while you can.

Speaker 1 Getting on my computer as we speak. And those deals are good through April 30th, 2026.
So you can book now, even if you're not ready to travel anytime soon.

Speaker 3 And now, Tess, you know, I had a fabulous time on my Mediterranean cruise.

Speaker 3 And good news for other people who might want to do the same. I just saw that Norwegian Cruise Line is offering 50% off all cruises, not just the ones that they are desperate to sell.

Speaker 3 Everything on their site is on sale. This is their biggest sale of the year.
So So I would definitely jump on this one if you are considering a cruise with NCL.

Speaker 1 Okay, so I'm going to have to take about, I don't know, six weeks off to take advantage of all these deals that you're talking about.

Speaker 1 Hard life. Yeah, they've also brought back their free at-sea package.

Speaker 3 Yeah, this is a package that people really like. It's on Norwegian Cruise Line.
It includes a bunch more things.

Speaker 3 They throw in unlimited open bar, a certain amount of specialty dining meals, shore excursion credits, 150 minutes of free Wi-Fi.

Speaker 1 And it makes your sailing a lot more more all-inclusive, not just kind of the nickel and dime experience that you might otherwise expect on a lot of cruises, right?

Speaker 3 Yeah, I think most people do upgrade to this because it really removes that pain of pain while you're on the cruise. People want the all-inclusive experience.

Speaker 3 They don't want to always be pain-friendly upcharges. So this is a good one.
Pay for it up front and kind of package everything in there for a lot cheaper. Yeah.

Speaker 3 Now, I know we said most of the deals that we are excited about, but there is one deal that we actually don't know much about yet, but it comes from Expedia.

Speaker 3 It has caught my attention because Expedia is telling me that between Black Friday and Travel Tuesday, they will have up to 75% off stays at certain hotels through their flash deals page.

Speaker 3 I will say I'm kind of skeptical about what kind of properties are offering this.

Speaker 3 Hopefully it's the ones I actually want to stay at, but you know, I will be refreshing that deals page on Expedia just to see if there's any good ones.

Speaker 1 That sounds fantastic. And I'll probably spend my entire Thanksgiving break doing that.
Beautiful. So I'm going to need another six weeks off.

Speaker 1 I'm just not going to work next year.

Speaker 3 Someone, our bosses, I hope they're listening to this.

Speaker 3 Approve that PTO, bosses, please.

Speaker 1 All right. How about any overall trends, Sally?

Speaker 3 Yeah, I will say kind of in the same vein as these deals launching so early, we are also just seeing longer travel windows to actually take advantage of these deals.

Speaker 3 So I know a lot of people say, I am not traveling in January. This is my time that I'm focused on staying at home, cleaning up the house.

Speaker 3 But what's really nice is that many of these deals extend far out into 2026. Also, many of these deals don't require you to book right away.

Speaker 3 Some of them will allow you to book into early December and still get those deals. One other thing I'm noticing is more of those member only and quote promo code discounts.

Speaker 3 This is really what the hotels are doing to force you to book directly through them. You have to join their loyalty program, which means they get their emails.

Speaker 3 And then also, if you book direct, that allows the hotels to pocket more money because they are not paying commissions to an online travel agency like Expedia if you book through them.

Speaker 3 And then Tess, finally, I'll give you one more trend I'm noticing is lots of stackable perks.

Speaker 3 This is where you don't just get a discount, but they might give you resort credits or free nights or spa credits.

Speaker 3 This is an interesting strategy because it lets luxury hotels get away with posting basically a higher upfront price, but then they kind of make it affordable because you get all these freebies that you otherwise would pay for.

Speaker 3 So this gets people in the door, but it also allows them to retain that higher upfront price and retain that premium image.

Speaker 1 You know, I have to say the whole stacking thing gives me a headache.

Speaker 3 You're like, I just want a cheaper upfront price.

Speaker 1 Yes.

Speaker 1 I wish I could take advantage of that kind of thing, but keeping track of all of it, figuring out how to optimize this card and that promo, just, it makes me want to just, I don't know, eat ice cream and watch Netflix.

Speaker 3 Probably one of those hotels will give you out the free ice cream.

Speaker 1 Yeah.

Speaker 1 That said, good on you if you've got the patience. And maybe if you excel at Excel.
Beautiful. All right.

Speaker 1 Now, speaking of Thanksgiving and Black Friday and all that, what are you predicting for Thanksgiving travel crowds?

Speaker 3 I do think this will be yet another record-breaking year for Thanksgiving travel. So the Sunday after Thanksgiving almost always sets records for busiest travel day of the entire year.

Speaker 3 So anyone traveling next week should brace yourself.

Speaker 1 And you really think we'll top it again in 2025?

Speaker 3 I do. So travel analytics site Sirium shared data with us that as of October 31st, 2025, bookings were up 2.2% 2.2% for travel between the Wednesday before Thanksgiving to Thanksgiving Sunday.

Speaker 3 That's compared to the same period last year. Now, even during the government shutdown, we saw the bookings rate slightly slow from those pre-Halloween levels.

Speaker 3 I think people kind of got panicked about their flights possibly being canceled, but that rate is still higher than last year. So yes, I am racing for record crowds in 2025.

Speaker 1 That makes me glad that I'm driving to my destination.

Speaker 3 I don't bother with flying either.

Speaker 1 Speaking of government shutdown, Sally, where do you think we're at with that? Are we recovered yet?

Speaker 3 The good news is that actually on Monday morning, the FAA's flight reduction emergency order was terminated. This is basically a sign that normal flight operations can resume.

Speaker 3 That was that requirement to reduce flights. So it is now over.

Speaker 1 So no more canceled flights?

Speaker 3 Oh, tests. No, no, no.

Speaker 1 That is.

Speaker 3 Shutdown or not, the average flight cancellation rate is around 1% to 2% on a typical day. So that is lower than at one point they were saying canceling flights by 10%.

Speaker 3 So one to 2% is still not nothing. I also have to say the average on-time arrivals rate year to date is 75%.

Speaker 3 That means one in four flights land at least 15 minutes past their scheduled time.

Speaker 1 All right. So any advice for travelers at this point?

Speaker 3 I always tell people, focus on what you can control. Thanksgiving is really hard because you might have weather delays.
Obviously, you cannot control the weather.

Speaker 3 And then with packed planes, you have less wiggle room to reschedule people's whose flights maybe did get canceled for the weather. What you can control, though, is a way to get there elsewhere.

Speaker 3 So maybe you know nearby airports you might fly into instead. If you can get a train there, in fact, you know, Tess, I was just in Italy and my flight from Trieste got canceled.

Speaker 3 So instead, we last minute jumped on a train over to the nearby, but still two hours away, Venice Marco Polo airport to fly home from there instead. So I promise I do practice when I preach.

Speaker 1 Love it. I mean, if you have to go to Venice,

Speaker 1 well, not a bad place to enjoy it.

Speaker 3 It was like a last-minute run. We didn't actually have time to go.
You didn't actually possibly go

Speaker 3 and enjoy it on the canals, but I was like, you know what? We will make it happen. We will survive.

Speaker 1 All right. Well, now moving over to some Hilton news.
I know you reported this week that they're making it easier to earn status and they're introducing a brand new top tier called Diamond Reserve.

Speaker 3 That is exactly right. So gold status, which is that sweet spot mid-tier status level, now only requires 25 nights per year to reach.
That is instead of 40.

Speaker 3 15 fewer nights in past years makes this way more attainable for so many people.

Speaker 1 Yeah, that's a massive reduction. That makes gold actually achievable for people who aren't road warriors.

Speaker 3 People who stay 40 nights, you impress me.

Speaker 3 And then, of course, even though they have reduced the status levels, you still get all the same gold benefits, space available room upgrades, the daily food and beverage credit, and 80% bonus points.

Speaker 1 What about diamond then? Because I know that's the tier a lot of our frequent travel listeners are chasing.

Speaker 3 That one also drops from 60 60 nights to 50 nights. Again, faster to achieve.
And you also keep all those same benefits, upgrades, lounge access.

Speaker 3 There is the 48-hour room guarantee and 100% bonus points.

Speaker 1 But in reducing the requirements to hit these old tiers, they've added this one new, even higher tier. So now tell us about this.
Diamond reserve tier because it sounds fancy.

Speaker 3 Yes, Tess, it is fancy. This is their new top tier elite status level.
To get it, you have to be pretty darn fancy.

Speaker 3 Not only do you have to spend 80 nights per year in a Hilton hotel, which I'm like, this is for Eloise at the Plaza, I guess. You have to spend 80 nights minimum.

Speaker 3 And then also you have to make $18,000 in eligible spend on top of that to qualify for elite status.

Speaker 1 It's nights and spend?

Speaker 3 That's different. Right.
It is both requirements. Often it'll be an either or, but you have to do both.
So this is really for Hilton's most loyal, highest spending guests. I guess little Miss Eloise.

Speaker 3 If you get it, though, the benefits are pretty incredible. They have something called the Confirmable Upgrade Award.

Speaker 3 Basically, you lock in a room upgrade up to a one-bedroom suite at the time of booking.

Speaker 3 This is much better than kind of those space-available room upgrades where you just kind of pray that you get something. I will say the suite upgrade is limited to stays of up to seven nights.

Speaker 1 That's actually game-changing for people who really value certainty.

Speaker 3 Yeah, because there are some people who really need to have a suite. And if it's only space available, they might just pay for the suite.

Speaker 3 But with this, if you know that you'll get that upgrade, then sweet, you're saving money.

Speaker 1 Sweet for a suite?

Speaker 3 So you get your first confirmable upgrade reward when you achieve diamond reserve. And then you can earn a second one at either 120 nights or 30,000 points.

Speaker 3 And then, of course, that is on top of other perks like guaranteed 4 p.m. late checkout on every stay.

Speaker 1 Now, what about the stuff that's staying the same? Because I know people love certain Hilton benefits.

Speaker 3 I really like the the Hilton Elite Status Program. They have really nice benefits, like no blackout dates on awards days, no resort fees when you book with points.

Speaker 3 So I'm always trying to book a Hilton with points for that. That's huge.

Speaker 1 I hate resort fees.

Speaker 3 Does anyone like them?

Speaker 1 No.

Speaker 3 Other good things, you can still combine points in cash, which is good if you don't have enough points to cover the full rate.

Speaker 3 And then another really good one, they have the fifth night free perk when you pay with points. So all the more reason to pay with points.

Speaker 1 And when does all this go into effect?

Speaker 3 January 2026 for the tier changes and Diamond Reserve launch. So you do have a little time to strategize.

Speaker 3 If you're close to hitting a status tier this year, maybe push it to hit before any sort of changes.

Speaker 3 But honestly, with the lower requirements coming, most people will probably benefit from just waiting because these new thresholds are so much more achievable.

Speaker 1 And if someone's thinking, should I try to hit Diamond Reserve and be healthy?

Speaker 3 Then... reach out to me because I want to be your best friend.

Speaker 3 But you know, what I will say is unless you are naturally doing 80 nights a year with Hilton, don't try to chase this one.

Speaker 3 The benefits are amazing, but just because the spend requirement is so high, it is not worth forcing stays. You don't need just to qualify.

Speaker 3 I do like the elevated benefits of Diamond Reserve versus just diamond, but I do think gold and diamond really are so much more attainable and still really good value.

Speaker 1 And I know you have some tech news that's going to make getting through airport security a bit easier.

Speaker 3 Ooh, you ready for this one, Tess?

Speaker 1 Anything that speeds speeds up the TSA line has my attention.

Speaker 3 Then wait for it. Apple just announced something called Digital ID.
This is basically a way to create an ID in your Apple wallet using your U.S.

Speaker 3 passport instead of needing a real ID compliant driver's license or state ID.

Speaker 1 This is interesting as, you know, I don't think everyone has a real ID compliant driver's license yet. And those requirements have been causing some headaches.

Speaker 3 Yes, I have heard so many people complain about those. So now if you have a U.S.

Speaker 3 passport, you can scan it with your iPhone, do the whole facial facial verification thing that the iPhone makes you do, and then boom, you've got a digital ID right in your Apple wallet.

Speaker 1 And it's launching in beta at TSA checkpoints at more than 250 airports across the U.S.

Speaker 1 Of course, you do still need your physical passport for international travel.

Speaker 3 Yes. Thank you for sharing that caveat.
I'm very glad you said that. This is super important.
Digital ID is not a replacement for your physical passport.

Speaker 3 So if you're traveling internationally, you're doing any sort of border crossing, you do still need that actual passport book.

Speaker 3 This is just for not having that real ID compliant driver's license for domestic use.

Speaker 1 So it's really more like a convenient backup ID for that domestic travel.

Speaker 3 Which is great. I mean, even if you lose your wallet, like I have done many times.

Speaker 1 Yes, you have.

Speaker 3 This is a really, really good option to have, just in a pinch. So I've already signed up for mine.

Speaker 1 Now, I don't want to get too long on this, but can we talk a little bit about the privacy angle?

Speaker 3 Yeah, I do want to kind of quash some potential privacy concerns with this. All All your digital ID data is encrypted.
It is stored on your device, not in the cloud.

Speaker 3 Apple cannot see when or where you present your ID or what information was shared.

Speaker 1 All right, that's reassuring.

Speaker 3 Yes, you also have to authenticate with Face ID or Touch ID every time you use it. So somebody else can't just take your ID.
And I love this part.

Speaker 3 You get to review exactly what information is being requested before you share it.

Speaker 3 So if someone just needs to, let's say, verify your date of birth, they wouldn't get access to your address or other details like that.

Speaker 1 All right. So it's not an all or nothing thing.

Speaker 1 I have to say, as someone who travels constantly, I can see this being really convenient, kind of one less thing to dig out of my bag and hold on to its security.

Speaker 3 Yes, the invention of digital boarding passes, so I don't need the paper ones to inevitably lose is such a game changer. So this sort of fits into that same vein for me.

Speaker 1 All right. Before we get to Megan's interview, I want to know where you've been traveling lately, Sally.

Speaker 3 Tess, I just got back from Hotel Emma, which is the fabulous hidden gem of a hotel in one of my favorite cities on earth. That is San Antonio, Texas.

Speaker 1 Great city. Is it an Alamo-themed hotel? What's it like?

Speaker 3 No, it's actually kind of a beer-themed hotel. It is wild also to think that this place is 10 years old because it feels timeless.
So the hotel is very new, but it is an industrial renovation.

Speaker 3 It is formerly a brewery from the 19th century. It has beautiful old industrial charm.
It has this amazing backstory of these three Emma women. One of them killed her lover.

Speaker 3 I'm like, it should be a TV show. Paramount, I hope you're listening.
Make a show out of this.

Speaker 3 And the hotel itself, no deaths actually happening at the hotel. It's absolutely beautiful because this hotel has everything luxury should have.
There is a library inside the hotel.

Speaker 3 The library has this neat spiral staircase. In the morning, they serve muffins and coffee.
It feels like something out of beauty and the beast. Check out my Instagram and TikTok at Save with Sally.

Speaker 3 I've got a video of it.

Speaker 1 That is very cool. I've never heard of it.

Speaker 3 I had not heard of Hotel Emma either until I was in San Antonio just for fun for the 4th of July. I was driving around and my Uber driver was like, you need to go see this place called Hotel Emma.

Speaker 3 So I was like, let's go. Drop me off there.

Speaker 3 We fell in love. I needed to find out how I could go experience it.

Speaker 3 in the name of research of course so i got in touch with their team they invited me to stay for their big 10th anniversary celebration this past weekend you know i think that's a perfect reminder that sometimes the best travel finds come from a great local recommendation, right?

Speaker 1 Or maybe just a curious Uber driver.

Speaker 3 Yo, the Uber drivers, no, always get recommendations from the Uber drivers. Okay, speaking of recommendations, should we get to the topic of the robots making recommendations?

Speaker 1 And not just any recommendations, but price recommendations, and not always in your favor.

Speaker 3 We'll have more in a moment. Stay with us.

Speaker 4 Sally, I think we hear a lot about people using AI to plan travel, right?

Speaker 3 Yeah, you know, I get so many questions about what kind of AI tools we can use. And so I just went basic and used ChatGPT to at least try to help me plan my trip to Greece.

Speaker 3 And I kind of felt let down. And maybe this is specific to Greece, but a lot of the cities and beaches and all that sound the same.

Speaker 3 And so I asked ChatGPT to create itineraries for me on these specific Greek islands. And then I went into Google Maps to plug in these itineraries.

Speaker 3 And it was like literally sending me to different islands. I think

Speaker 3 I think it got the cities confused. And so I am very nervous about AI usage for people who are trying to plan their own travel.

Speaker 4 It is not always good for travelers. This year we learned some new ways that travel companies are using AI for prices, actually.

Speaker 4 No surprise. This does not end well for consumers.

Speaker 3 Yeah, you think they're trying to dupe consumers into paying more money?

Speaker 4 Yeah, maybe not dupe them, but just AI knows you so well, especially if it has your profile.

Speaker 3 It's like, this is a rich person. They will pay more.
Exactly.

Speaker 4 So the AI is helping companies calculate exactly how much they think you'd be willing to pay, like the highest, highest amount, the entire top of your travel budget.

Speaker 4 And I think it's going to be harder and harder to find deals going forward when companies are using AI like this.

Speaker 3 Interesting. I've heard this as a trend where they're they're like, you live in San Francisco, you are used to high prices.
We can tell you're from San Francisco. So boom, high prices.

Speaker 4 No,

Speaker 4 gotta go on incognito.

Speaker 3 Yeah, interesting. Okay, tell me more, Megan.

Speaker 4 So I actually invited an expert on to talk about this. Her name is Lindsay Owens.
She's the executive director of Groundwork Collaborative, which is an economic think tank and advocacy group.

Speaker 4 It's based in Washington, D.C. And she's an expert on how technology is changing consumer economics.

Speaker 3 And hopefully she has some tips to help us know how to avoid these higher prices.

Speaker 1 Ah, sort of.

Speaker 4 Lindsay, welcome to Smart Travel.

Speaker 5 Thanks for having me.

Speaker 4 Tell me a little bit about your work.

Speaker 4 I can kind of understand why travel is an attractive thing to look more into with your line of work, but put in your own words, tell us why you started looking into travel pricing.

Speaker 5 I started looking into travel pricing because I study pricing in all its forms.

Speaker 5 And in particular, I study how companies are using new technologies to derive more revenue from items without really making the items any better, but just by getting you to pay a little more.

Speaker 5 And if you study pricing in that way, you will pretty quickly end up spending a lot of time thinking about and reading about the airline industry.

Speaker 5 And the reason for that is, in many respects, the airlines are the godfather of some of the most insidious and frustrating and vexing pricing practices that consumers face today.

Speaker 5 Pricing practices like surge pricing, which most Americans attribute to Uber, really predates Uber by many, many, many years.

Speaker 5 The airlines really pioneered revenue management systems that use dynamic pricing, this idea that As there are fewer seats on the plane, you're going to pay more for each remaining seat.

Speaker 5 People are really mad about Ticketmaster and the fact that Ticketmaster adds on all these fees at the end of your purchase, right? Your service charges and things like that. Trip pricing

Speaker 5 really was supercharged by the airlines who started unbundling the consumer experience and charging you for all of the little extras, your baggage, to board the plane early, to sit next to your family, to sit next to the window and things like that.

Speaker 5 So it's pretty hard to study pricing without spending a lot of time or maybe even more time than you want thinking about the airline industry.

Speaker 4 Let's talk about a really recent development in pricing, which is AI pricing. I believe it's the use of AI to get customers the most optimal price for them.

Speaker 4 And that might not necessarily be lower than the other prices they can see publicly. Can you tell us what AI pricing is exactly?

Speaker 5 So airlines use all sorts of technologies to help them with pricing.

Speaker 5 And airlines have been using, you know, automated revenue management systems and algorithms to help them figure out pricing for decades. So that's not new.

Speaker 5 I think what is new is the ways in which AI has been able to supercharge some of their capabilities and pricing.

Speaker 5 So this summer, there was quite a brouhaha or a dust step, if you will, when American consumers learned, in part because Delta told us that Delta had partnered with an Israeli artificial intelligence company called Fetcher to help them with their pricing.

Speaker 5 And they told us about this in one of their investor days, and then they told their investors on their earnings calls.

Speaker 5 What they told us is that they had been partnering with Fetcher to allow them to more quickly and more aggressively change prices on consumers.

Speaker 5 And they gave a few examples in the earnings call, but they basically said, look, for a long time, we have matched our competitors' prices.

Speaker 5 But now with companies like Fetcher, we're able to run these real-time experiments across markets to see just how high we can increase prices on a given route without losing market share, which means, you know, for the lay consumer, without you balking and deciding to fly with a different carrier that's not Delta.

Speaker 5 And what we learned is that, you know, the CEO, the president of Delta was very bullish on this experiment because they had been tinkering around with $20 on routes to Tokyo and $40 on routes to San Francisco, and people weren't really balking.

Speaker 5 And they had seen pretty big revenue increases in just this sort of tiny slice of the market that they had given Fetcher to sort of toy around with initially.

Speaker 5 And then they said they were planning to really expand this use of this AI pricing to a much larger portion of Delta's roots, 20% by the end of the year in the original call a couple of months ago.

Speaker 5 And so basically what we're seeing here is in some ways, there's nothing new here.

Speaker 5 It's just a more aggressive, more fast-paced, harder to escape use of their existing pricing strategies and practices.

Speaker 4 I am curious, though, why do you think this particular announcement from from Delta caused this huge backlash very publicly?

Speaker 5 Yeah, I mean, I think there are a few reasons.

Speaker 5 The first is when folks in journalism and the media, when enterprising folks who think about and cover travel frequently started looking into this, and maybe they've never heard of Fetcher before.

Speaker 5 Who is this Fetcher?

Speaker 5 They went to Fetcher's website and, you know, on the website, they boasted quite clearly about their interest in eventually getting to something called surveillance pricing or personalized pricing.

Speaker 5 And this is really different than dynamic pricing.

Speaker 5 So for folks who aren't thinking about these terms frequently, dynamic pricing is really just pricing that changes based on conditions in the market, things like supply and demand.

Speaker 5 So, you know, it's raining outside. There's a lot more people trying to get an An Uber.
The price goes up. There's three seats left on a plane.
The price goes up. The plane is empty.

Speaker 5 They need to fill the seats. You can get a real deal, right? You book earlier, you get a better deal.
That's your dynamic pricing.

Speaker 5 Now, that's a bit of an oversimplification because some companies use dynamic pricing and they're not always tethering those price changes to, you know, with a lot of fidelity to supply and demand.

Speaker 5 And frankly, we don't really know if they are.

Speaker 5 We don't know if they're just telling us there are three seats left on the plane and you need to book really fast or there's two hotel rooms left in this hotel or there are 40 other people looking at this exact room right now and there are only two hotel rooms left.

Speaker 5 Like we don't really know any of that. But that's kind of what you're thinking of when you're looking at something like dynamic pricing.

Speaker 4 Right.

Speaker 5 Personalized pricing is a little different. This is pricing that's not really fully based on broad aggregate factors of supply and demand, how many seats there are.

Speaker 5 It's pricing that looks more closely at what you individually, the consumer, might be willing to pay for the seat, regardless of how many seats are left.

Speaker 5 And to do personalized pricing, of course, companies need to know things about you.

Speaker 5 What I think really scared people is because of the long history of Americans using loyalty programs and logging into airlines like Delta, Delta knows a lot about you.

Speaker 1 Like a whole lot.

Speaker 5 How many people are in your family? Where you travel for Christmas? Where you go on spring break?

Speaker 5 Maybe information about your financial circumstances because you've opened a credit card with Delta, right?

Speaker 5 So it was, I think, really frightening to think about Delta exploring something like personalized pricing or what, you know, I like to call surveillance pricing because I think it more accurately captures what's happening.

Speaker 5 You know, we have surveillance advertising, right? You hover over something, you're looking at a purse, and then the next day you're on Instagram and, oh my God, the purse is right there.

Speaker 5 How did they know, right? They know because they look at your browsing history and they boomerang it back to you.

Speaker 5 And in the same way, surveillance pricing is, you hovered over that business class ticket, you're really tempted, it's a long haul flight.

Speaker 5 The next day, you know, it comes back to you at a higher price point because they think you're pretty interested. So I think that's what people really got scared about.

Speaker 5 This is a new frontier that's more invasive. And I think people rightly view it as unfair.

Speaker 4 That is scary. And it really goes against, you know, what I feel like we talk about a lot, which is use the loyalty programs to their full advantage.
Log in, you might get better pricing.

Speaker 4 And are you saying that might not be the way forward here?

Speaker 5 Well, I am saying that one additional benefit to airline carriers of you participating in a loyalty program.

Speaker 5 and particularly over time with considerable frequency and fidelity is that they know a lot about you. And that information is really valuable.

Speaker 5 It's valuable to companies like Delta Delta who might want to use it

Speaker 5 to set pricing or even to tailor promotions or advertising to you.

Speaker 5 But it's also potentially valuable as companies like Delta think about how they're going to continue increasing their revenue and meeting shareholder demand for quarterly returns in a world in which, you know, the technology is not getting better, right?

Speaker 5 It's not getting quicker to fly from San Francisco to New York, right?

Speaker 3 Right. So

Speaker 5 how are they going to keep making more and more money each quarter you know one possibility here is monetizing the data in various ways and that's not only turning it back against you that's also potentially selling it to third parties so i think you know the data is is quite valuable is there any upside here for consumers something that gets talked about with dynamic pricing is that occasionally you do get a good deal.

Speaker 4 Is there any possibility that you could get a better deal because of these AI pricing strategies? Or are we just not ever going to be as smart as the robots?

Speaker 5 Yeah, I mean, I think there's two things to consider in answering this question. The first is that it's absolutely true that these technologies in some respect are sort of on their face neutral.

Speaker 5 It is the humans at the companies who make decisions to use them in certain ways.

Speaker 5 And the concern here was that, you know, the Delta CEO was working with Fetcher to use it in a way that was going to result in more pain to you, to your wallet.

Speaker 5 But of course, the same technologies can be flipped and reversed and used to offer discounts.

Speaker 5 But I think that's where we need to look at a second feature, which is what are the incentives of these companies? Why are they partnering with companies like Fetcher?

Speaker 5 And I think in this case, the data was pretty clear, both because the Delta president and all of his examples to his investors of how they were using Fetcher, it always resulted in fair price increases, always.

Speaker 5 But secondly, when you look at a company like Fetcher, and we've looked at it in great detail, they actually have a quite long white paper that explains their methodology.

Speaker 5 They sort of tell you too that they're in the business of increasing prices.

Speaker 5 And the best example I'll give you is when selling their product, they've got a long section that talks about the two phases of working with Fetcher's AI system.

Speaker 5 And phase one is the exploration phase, where they sort of study the markets, study the routes, study your competitors, study your consumers.

Speaker 5 And phase two is the exploitation phase, the phase in which they start charging you more. It's hard to imagine that the exploitation phase is really about offering you discounts.

Speaker 5 So, unfortunately, I think we know the direction of travel here, if you will. And I don't think it's looking very good for consumers.

Speaker 4 And after Delta announced all of the changes to their pricing strategies with Becher, they ended up rolling it back and said that they will do less of it.

Speaker 4 What is the future of them sticking to that promise?

Speaker 5 Yeah, that's a great question.

Speaker 5 They backtracked pretty quickly. I think in part because consumer backlash was swift, but in part because their competitors came in hot,

Speaker 5 immediately criticized the decision and distanced themselves from it and said they would never do something like this, you know, at Southwest, at American.

Speaker 5 And there's kind of a long tradition of companies in the consumer goods space, in the retail space, touching the stove and then backtracking when their competitors came out on the other side.

Speaker 5 The best example, which I love to use when I talk about this, is in the 1990s, the CEO of Coke announced that, or he didn't really announce, he told a Brazilian journalist that Coke was piloting a program where they could install thermometers on Coke vending machines so that they could charge you more for a Coke on a hot day.

Speaker 5 You know, I imagine this was a relatively offhanded conversation to this Brazilian journalist, but it was the shot heard around the world.

Speaker 5 And even in the mid-90s, well, before things went viral on the internet, every newspaper in the country covered the story with shock and horror.

Speaker 5 And of course, immediately Pepsi seized on this moment and said, you you know, we're in the business of quenching thirst, not gouging you, right? And we will never do something like that at Pepsi.

Speaker 5 On a hot day, you will always be able to get a Pepsi. You won't have to pay an arm and a leg for it.
And so this is one of the many ways in which these types of practices get reined in.

Speaker 5 But of course, the ways in which they start to become normalized is when all of the CEOs of the airlines kind of get together and decide this is the way forward. And they kind of all lock arms.

Speaker 5 You know, I don't want to say it's collusion, although we do have a robust history of antitrust violations in the airline space.

Speaker 5 But they lock arms together and decide they're all going to do it. And therefore, the consumer really has no choice but to abide.
this new era of surveillance pricing.

Speaker 5 And so I think the moment in which we'll see this type of pricing in the airlines is the moment in which they've decided that it's going to be the new sort of industry trend rather than a one-off kind of, you know, Delta getting out over their skis.

Speaker 4 That future does not seem that far off, unfortunately. What else can consumers do kind of in this in-between period that we're in to combat those prices? Like comparison shopping is harder.

Speaker 4 I'm not sure that regular consumers have their own AI robots to go ahead and find the best flights or hotels or whatever it may be for them. What can consumers do right now?

Speaker 5 This is not meant to be a dodge to the question, but I really do believe

Speaker 5 in my core that it should not be every individual consumer's job to beat the machine.

Speaker 5 I really think it is the job of regulators at the federal level, at the state level. It is their job to make sure that markets are fair and honest for consumers.

Speaker 5 And that is such an important bedrock of a functioning market economy and an economy in which both consumers and sellers, businesses, airlines in this case are in a good place.

Speaker 5 So I really don't think it is the individual's job to beat the machine.

Speaker 4 Oof, that's good.

Speaker 5 I do think that in the travel space and in the airline space specifically, there is this kind of like long storied tradition of figuring out how to help consumers. game the system, right?

Speaker 5 To every small detail, the flight maps for the airline, so you can get the exact best seat far away from the bathroom or with extra legroom or all of these things.

Speaker 5 And so I think it's tempting and easy in this sector of the economy to think it's the consumer's job to figure all this out because for so long it has been our job to try to avoid the tricks and traps that are set for us by the airline industry.

Speaker 5 And, you know, to the

Speaker 5 point that we talked about at the top of this conversation, you know, the airlines have a rich tradition of throwing all sorts of hurdles at us

Speaker 5 for us to dodge and bob and weave around. So we're kind of used to it.

Speaker 5 We're used to being treated poorly and then having to sort of fork over money for the privilege of not being treated poorly, right?

Speaker 5 The airlines really invented the velvet rope economy that we're seeing so many Americans have to deal with in other aspects of their lives.

Speaker 5 And I think the way to think about how to get our power back here is really to think about what policymakers should do.

Speaker 5 And I will say, the Secretary of Transportation under President Biden, Pete Budig,

Speaker 5 was doing a lot on this score. They were making a lot of changes, eliminating junk fees, giving us automatic refunds.

Speaker 5 You know, if your Wi-Fi doesn't work on the plane and you've paid for it, you get your $12 back. Unfortunately,

Speaker 5 a lot of those investigations and analyses have been paused under the new Trump administration transportation department.

Speaker 5 And also, sadly, they've announced that a lot of those consumer protections that were really historic reversals in the way things have been heading in the airlines are now being walked back, pulled back, re-examined, slow-walked.

Speaker 5 I mean, it depends on which rule, which one of those things it is, totally reversed or slow walked or paused.

Speaker 5 But yeah, I mean, things are certainly not moving in a good direction in this respect.

Speaker 4 One of the investigations I remember they started under President Biden's administration administration was into loyalty programs and the value of your points and miles that you earn with these loyalty programs.

Speaker 4 I'm curious, have you seen any evidence that airlines or other travel companies are using AI pricing strategies for their, you know, award stays or award flights, the ones that you can book on points and miles?

Speaker 4 Or has that not really come to this side of travel booking yet?

Speaker 5 Yeah, I mean, I think it's really already there on the loyalty front. I mean, look, a lot of the ways in which flight prices change carry over into how many miles it costs you to buy that ticket.

Speaker 5 And so already we know that dynamic pricing is used in the loyalty space, in the points and miles space.

Speaker 5 And so I think you have to assume that any of the sort of supercharged versions of that dynamic pricing, like AI-enabled dynamic pricing, are carrying over there as well.

Speaker 5 So sadly, I don't think one option will be booking with points and miles if you want to avoid some of the fluctuations.

Speaker 4 And one thing you mentioned earlier was about how airlines have pioneered this unbundled experience for consumers. I'm thinking of different fares.
I mean, Delta has made it incredibly complicated.

Speaker 4 Not only are there main economy, basic economy, business class, there's actually like now, I believe, four fares in economy itself.

Speaker 4 What should consumers know and be careful about in terms of those different fares? And when should they book, you know, possibly a higher fare?

Speaker 5 So I think what's going on with fair classes is sort of a supercharged version of a kind of old pricing principle, which is the good, better, best pricing principle. So what is good, better, best?

Speaker 5 Good, better, best is when you take the product, let's say you start by only selling one product, a tube of toothpaste, and you gussy it up a little bit and you sell that as the premium version.

Speaker 5 And then you degrade it a little bit too, and you sell that as the entry-level version. And now you have three versions.

Speaker 5 You have the good version, you have the better version, and you have the best version. This is a surefire way to increase your revenue.

Speaker 5 Some number of people who used to buy the standard product will be tempted by the premium product.

Speaker 5 Some number of people who wouldn't buy your standard product because they only like premium products will crowd in and pick your premium product.

Speaker 5 Some number of people who are at the standard level are discount shoppers and love to get a discount and will take the good offering now.

Speaker 5 And some number of people who are quite price sensitive who couldn't come in and buy the standard option will now be interested in the basic option.

Speaker 5 And so that's really what we're seeing across the board in the airlines: that type of segmentation and more fine-grained price discrimination is really about bringing in new consumers and upgrading existing consumers.

Speaker 5 And it's really, really, really cheap. Often, what they're really doing is the best version now is like the old standard version, right?

Speaker 5 Yeah, which is the version where you get to bring your suitcases on. And the good version is the version where they charge you for your suitcases.

Speaker 5 The other thing, of course, that the sort of degraded options are important for is to help the legacy larger carriers compete with budget carriers as well, right?

Speaker 5 Without having to drop their total price.

Speaker 5 Instead, you sort of, you know, rejigger the seating arrangements and now you've got sort of Spirit in the back and, you know, British Airways Club World in the front, right?

Speaker 4 One of the hardest parts of having all these fares is that it's really hard to compare across airlines for exactly the reason you just said, like maybe their basic version is more similar to a budget airline's standard version.

Speaker 4 Or when you just do a simple search for a flight, you're getting all these results, but you're not entirely sure what what is a normal price to pay or what you should expect to come with your fare.

Speaker 4 Do you have any tips for people trying to comparison shop in today's digital landscape of buying online?

Speaker 5 Yeah, I mean, the whole ballgame is for you not to comparison shop. And there are a whole host of ways that they're trying to do that.
And you're talking about one of them, which is just...

Speaker 5 making it hard to do an apples to apples comparison because you literally don't know which class at one one carrier is equivalent to another class at another carrier.

Speaker 5 But they do this in other ways too. They use things called dark patterns, which are basically internet kind of maze technologies, if you will.

Speaker 5 If you've ever been to a casino and you've had a hard time finding the exit, that's because they're designed that way on purpose, right? For you to stay in and keep

Speaker 5 you know, keep gambling and keep buying drinks and sunscreen and whatever. Similarly, companies use tools like that online to keep you from seeing other offerings, even within the company, right?

Speaker 5 They want to keep you looking at premium priced items like a business class and not looking down below at other offerings. So what is a consumer to do?

Speaker 5 I do think that one of the best policy tools we had to try to help with comparison shopping was eliminating things like drip pricing and junk fees and unbundling and requiring airlines to disclose all-in pricing upfront.

Speaker 5 So as close as possible to apples-to-apples comparison, right?

Speaker 5 Obviously, there are variations across carriers, but in general, you would know that the fare included luggage, that the fare included boarding, that the fare included sitting with your family member, all of those things.

Speaker 5 So policies like that, I think, are consumers' friends for sure.

Speaker 4 We have been talking a lot about airlines specifically, but you've seen dynamic pricing, AI pricing, all sorts of different tactics across the travel industry, like hotels.

Speaker 4 And one I really want to talk about, which is rental cars. Can you tell us how rental car companies are using AI to charge people more?

Speaker 5 So this summer, Hertz began piloting. a new AI-enabled sort of surveillance system for determining whether or not you damaged your vehicle after you rented it.

Speaker 5 So in six airports around the country, they rolled out this new technology. I actually have first-hand experience with this one because

Speaker 5 I rented a Hertz car in Nashville, Tennessee, which is one of the pilot locations.

Speaker 5 And I noticed that I didn't have to kind of like get out the goth pencil and walk around the car marking up all the scuffs.

Speaker 5 Instead, I drove out of the airport, but through this sort of like kind of car wash style archway.

Speaker 5 awning.

Speaker 4 I've been through one of these too. It's kind of like an arch that has like a bunch of lights lights on it and you just drive through it, right? Okay.

Speaker 4 Scary. I did not know what was happening when I drove through that thing.

Speaker 5 So that's what happened. They took like thousands of pictures of the car and presumably probably you too, right?

Speaker 5 I think it would probably be hard for them to take pictures of the driver's side of the car without snapping your picture.

Speaker 5 And then when you return the car, you also drove through one of those freaky lighted archways and they took another thousand photos.

Speaker 5 And then what they used AI for was to compare the before and after photos and see if you damaged the vehicle. And if you did damage the vehicle, then it automatically sent you a bill.

Speaker 5 Now, here is the interesting part. So, you know, AI was being used to help them very quickly analyze the before and after photos.

Speaker 5 But I think what happened next is a really good example of how a lot of these pricing frustrations that consumers deal with are not particularly newfangled.

Speaker 5 So, what happens next is they send you like a $185 bill for a scuff. Right.
And $50 of it is for the scuff, and $135 of it is for the service fee.

Speaker 5 And that's just sort of an old school predatory style.

Speaker 4 That's a junk fee, isn't it? It is.

Speaker 5 Yeah, it's just a junk fee. It's just an old regular kind of dumb junk fee.

Speaker 5 There's nothing high-tech about it. And then they also also use this other predatory tactic, which debt collectors nationwide use very proudly, which is they tell you that if you pay it right now,

Speaker 5 you can only pay $80.

Speaker 5 But if you go through the trouble of contesting it, it takes you a few days to finally get around to paying it, you got to pay full freight.

Speaker 5 And so what they're trying to do is lock you in to paying it without contesting it by inducing you with a lower price, by giving you a discount on basically the service fee.

Speaker 4 Wow. They can do that.
Is that legal? Yeah.

Speaker 1 Oh no. It's awful.

Speaker 3 Yeah.

Speaker 5 It's awful. And by the way, there is no human review in the Hertz process unless you contest the fee.
So it's, it's just a pure sort of AI analysis of the before and after photos.

Speaker 4 Interesting. And I would imagine a lot of people just even miss perhaps that charge because it might be days or weeks after your trip.
So you might not even see it.

Speaker 5 Totally. Or you just think it's part of the total price that you paid for the rental car.
You don't remember exactly how much it cost.

Speaker 5 Or maybe you think it was the, you know, refilling the tank fee or something like that that you expected that would be added on.

Speaker 4 That's really interesting because it's not only that consumers are dealing with AI raising their prices from the front end, you know, when they're booking a trip, but also after your trip is over, you're still not safe.

Speaker 4 There might be additional fees coming at you.

Speaker 4 Okay. So what are your predictions for, let's say, the next three years in the travel industry and what prices might look like by then?

Speaker 5 Look, I don't think this is getting a lot better anytime soon.

Speaker 5 What we know so far is the Trump administration is actually rolling back a lot of the consumer protections that were sort of advancing consumers' interest in the travel space.

Speaker 5 And so, you know, in an ideal world, the first thing we could do is try to stop the bleeding a little bit and stop seeing the kind of rollbacks of those policies.

Speaker 5 I do think moving forward, we should be having a national conversation about things like surveillance pricing and deciding whether or not we're okay with it.

Speaker 5 I don't think, you know, companies need to know information about you to set pricing. They can set standard pricing that is publicly available and visible to all of us.

Speaker 5 We can all pay the same amount for the same item. And I think it's worth thinking through how much data we want to let companies use in their pricing decisions.

Speaker 5 Already last year, New York State passed legislation to require companies to disclose their use of surveillance pricing.

Speaker 5 Now, I would have liked to have seen a ban on surveillance pricing, and that's actually where they were headed, but it ultimately was watered down to a mere disclosure requirement.

Speaker 5 But nonetheless, in places where industries are competitive, disclosure is useful, right? Because you can say, hey, I didn't know this company did that.

Speaker 5 Now that I know, I'm going to take my business elsewhere, right? So as a consumer, you could vote with your wallet and move along to a different offering.

Speaker 5 So, I think these conversations will be really important. Travel will be at the center of them, but there will be other conversations as well.

Speaker 5 Right now, in the healthcare setting, we're seeing a conversation about whether or not health insurance companies should be able to use AI claims denial tools to deny your healthcare coverage request in seconds or even one second in some cases.

Speaker 5 So, I think

Speaker 5 this is a new frontier for policymakers and consumers raising their voices like they did in the Delta Fetcher case, I think is a great example of how we can start to try to put some guardrails around the worst excesses of these technologies.

Speaker 4 Like you said, travelers are going to be at the center of this conversation going forward. Before we let you go, Lindsay, we always ask our guests.

Speaker 4 for a hot take related to travel as part of each episode. Do you have any hot takes that doesn't necessarily need to be plausible or even related to pricing if you don't want it to be?

Speaker 5 I think my hot take is that I think the fact that Americans are paying such close attention to pricing.

Speaker 5 Just recently we saw that there is starting to be some outrage about the use of dynamic pricing in the World Cup. for selling World Cup tickets.

Speaker 4 That's right. Yeah.

Speaker 5 I think it is going to call into question a lot lot of what has been conventional wisdom in the airline industry around the use of dynamic pricing.

Speaker 5 And we could eventually see enough consumer backlash that airlines have to move to more transparent forms of pricing, even absent federal regulation. I don't think this is going to happen overnight.

Speaker 5 But I think as Americans get more sophisticated about pricing, legacy organizations that have priced this way for a long time might have to reevaluate their systems as well.

Speaker 4 Ooh, that's interesting. It's like

Speaker 4 we are getting prices that are kind of adjusting based on consumer behavior, but our consumer behavior is changing. So it might be different going forward.
That's a great one.

Speaker 4 Lindsey Owens, thank you so much for being on the show.

Speaker 5 Thanks for having me.

Speaker 4 That's Lindsay Owens, the author of an upcoming book called Gouged, The End of a Fair Price in America.

Speaker 3 Okay, so my takeaway from this podcast is that AI is here to stay in pricing.

Speaker 4 Yep. Unfortunately, all of the travelers taking airplanes and, you know, renting cars are the guinea pigs here.
We're all going to be the test subjects for these new AI pricing strategies.

Speaker 4 Okay, I'm scared.

Speaker 3 I feel like a little science experiment.

Speaker 4 Seriously. By the way, if you guys want to follow us offline, Sally and I both post on social media quite a lot.
Sally is save with Sally and mine is MilesWithMegan Co.

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So please help us out.

Speaker 4 This episode was produced by Tess Biglin and Hilary Georgie and edited by Nick Charissimi. Claire Sosi helped with fact-checking.

Speaker 3 And as always, our disclaimer, we are not financial or investment advisors.

Speaker 3 This info is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances.

Speaker 4 We hope you're inspired to keep your passport full and your wallet even fuller. Thanks, everyone.
We'll see you next time.