Will « dynamic pricing » soon be extended to all sectors?

This is the title of an article published today by Le Nouvel Économiste. The latest example to back up the author’s words: Stonegate. Britain’s largest pub chain has announced that it will be charging 20 pence more for a pint of beer on busy evenings and weekends.

Seasonal pricing vs dynamic pricing

The terminology used in the rest of the article may impress the uninitiated: we’re talking about « surge pricing », artificial intelligence and dynamic pricing. And Adrien, a regular customer, is furious: « This is just a way of exploiting people looking for entertainment ».

Relax, it’s not as bad as it sounds. For a start, we’re not talking about dynamic pricing as such. We’re just talking about different prices for different periods or days of the week. Prices are higher on Saturday evenings, but the price of beer does not change dynamically.

And you don’t need AI to see that the Coach House, a pub on Piccadilly Circus, is fuller on Saturday evenings than on Tuesday mornings.

The issue here is one of fixed but seasonal prices, not dynamic pricing. When demand is strong at weekends and sufficiently recurrent and predictable, prices can be higher during these periods. It’s better to pay 20 pence more for a beer, without being crowded together, than to pay less by being on top of each other. That’s the choice that’s been made, and it’s understandable.

Revenue management: an increasingly widespread practice in various sectors

Many journalists, including those in the specialist media, confuse seasonal prices with dynamic pricing. This was the case a few months ago when Casino tested differentiated pricing on Sundays, passing on (clumsily and irrelevantly) the rise in costs in prices. A dozen articles were published on Casino’s « Dynamic Pricing ». But you now know that these were also seasonal prices, not dynamic pricing.

Nevertheless, the gist of the article is correct: more and more sectors are really moving towards dynamic pricing (or Yield Management, which encompasses this aspect as well as other management levers). Airlines led the way, followed by cruise lines, hotels and car hire. More recently, the railways, buses, campsites and, in general, virtually the entire transport and accommodation sector.

Other sectors have understood the benefits of Yield Management and are starting to adopt it: ticketing (leisure parks, concert halls, sports venues), car parks, golf courses, etc. We recently worked for tennis courses and a bowling alley. So yes, the practice is becoming more widespread. Not to « exploit people », as Adrien would say over his beer, but to regulate flows, maximise the average price during peak periods and, in return, significantly reduce prices during off-peak periods

Keywords: dynamic pricing, differentiated pricing, Yield Management, hotel, hotels, transport, aviation