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Tess Vigeland: There’s a phrase one of our producers likes to bandy about this time of year: “It’s not cool to be a jive turkey this close to Thanksgiving.” Agreed. But that’s exactly what some travel companies seem to think we are: a bunch of turkeys. ‘Cause the closer we get to the holiday season, the higher airfares will go. And we pay them.
But as Marketplace’s Steve Henn tell us, timing isn’t the only thing that we do wrong when it comes to picking a holiday flight.
Steve Henn: Who hasn’t been there? You agonize over when to buy an airline ticket. And then finally you pull the trigger and prices plummet online. In 2002, that happened to Oren Etzioni.
Oren Etzioni: I was on an airplane on my way to my brother’s wedding and I asked people seated next to me, ‘How much did you pay for your ticket?’ It turned out that they bought later than me and paid less.
The folks at the airline had just messed with the wrong guy. Etzioni is a computer science professor at the University of Washington.
Etzioni: I was actually somewhat incensed. And I started thinking about can we use computer methods — algorithms — to figure out when’s the right time to buy your ticket.
He didn’t realize but he was declaring war against an army airline analysts. Guys like Billy Goldberg.
Bill Goldberg: It was pretty satisfying when you would overbook a flight just right.
Bill Goldberg’s not a monster. He’s actually an old friend of mine. But right out of college he worked at a major U.S. airline. His job was to milk every passenger for as much money as possible.
Goldberg: That’s exactly right. I mean, if you had a customer who was willing to pay $1,000 for a seat, let’s say, and you knew from historical data you didn’t want to sell it to them for $800, you didn’t want to sell it to them for even $900, you wanted to squeeze out every last penny you could until you hit their breaking point.
And guys like Bill had some high-powered help. Rooms full of math wizards like E. Andrew Boyd. Until last year, Boyd was the chief scientist at a company you’ve probably never heard of called PROS. It writes computerized pricing systems for U.S. airlines. These algorithms are complex and Boyd says trying to game one on your own can lead to trouble.
E. Andrew Boyd: Oh Boy. Let me count the ways.
Boyd’s brain trust created computer models to separate airline customers into different buckets.
Boyd: One of them was the frequent flier bucket.
Golberg: One was them was what we called the Y travelers, then business travelers who would pay a lot of money.
There are buckets for grandmas headed to Florida. And students on spring break. The computers modeled their behavior and set prices.
The entire point is to make sure that a businessman whose company will pay full fare never gets a chance to buy a ticket priced for a grandma. And these algorithms can create wild price swings.
Imagine for a second that a high school band teacher goes online at 3 a.m. and books 30 cheap seats from New York to Pittsburgh. That freaks out the airline’s computer system. And the computer responds to the spike in demand by jacking up prices on the flight.
Those higher prices drive passengers to other airlines and that sets off their own computer pricing systems. Soon you get a wave of higher prices on flights from New York to Pittsburgh rolling across the board, but the demand doesn’t really exist and then prices fall. To the average observer these kind of price swings look choppy and chaotic, but Oren Etzioni thinks he’s cracked the code.
Etzioni: We played with different data-mining methods and we found the question of to buy or not to buy — ‘Should I buy or should I wait?’ was actually one we could answer with pretty good accuracy.
Etzioni’s program will not only find the lowest fare — it will also tell you if it makes sense to wait before you purchase a ticket. And if you wait, it will monitor the flight and e-mail you when prices drop.
Microsoft bought the company for more than $100 million and rolled it into Bing’s travel search engine. So now if you are in the market for an airline ticket, you can fight the airlines’ pricing algorithms with some math expertise of your own.
I checked it out and am still waiting to hear back on a ski trip to Utah.
In Silicon Valley, I’m Steve Henn for Marketplace Money.
Vigeland: And Steve has one more tip anyone booking a flight: Many airlines offer refunds on your fare if the prices drop after you buy.
And while you might not have time to track ticket prices all day long, there is a web site that will do it for you — for free. It’s called Yapta.com.
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