Jeff Gelles: Will Big Data be good or bad for airfares?

Websites to book tickets (from left) Travelocity, Kayak, and Priceline. A new method raises fears on buyers' privacy.
Websites to book tickets (from left) Travelocity, Kayak, and Priceline. A new method raises fears on buyers' privacy.
Posted: May 03, 2013

It's been heralded as the key to nipping a potential flu pandemic in the bud, by enabling scientists to mine illness-related Google searches as an early warning beacon. It's been spun as a game-changing political tool, by enabling analysts to mine data for deep insights on voters.

It's also been touted as a method for saving consumers money, by enabling them to use a data-centric tool such as Farecast - now built into Microsoft's Bing - to predict the best moment to book a flight.

But could Big Data, the popular term for algorithmic analyses that capitalize on our increasingly vast stores of data, also be used by businesses seeking an extra edge in profit - even, ironically, to lead some airline passengers to pay more?

That's the concern underlying a dispute over a new data-exchange standard promoted by the airline industry called the "New Distribution Capability." The 240-carrier International Air Transport Association is seeking approval for the standard, based on the computer language known as XML, from the U.S. Department of Transportation.

Critics of the NDC proposal, including travel agents and corporate travel managers, warn it could limit customers' ability to shop anonymously for the best fares through agents or third-party sites like Travelocity or Orbitz. Instead, airlines would make offers to "authenticated" shoppers, and could base fares on frequent-flier status, buying histories, and other personal data.

Airlines and IATA say the main result would be a better shopping experience, where even non-airline websites could pitch side deals - say, "priority boarding" or "more legroom" - that airlines themselves now offer.

"Some people like it and some people don't like it, but there are a lot more things you can buy today with your airline experience," says Perry Flint, an IATA spokesman.

Kevin Mitchell, chairman of the Wayne-based Business Travel Coalition, argues NDC will undermine fliers' ability to find the best fares. A key concern is that airlines' additional access to data on customers' habits - such as Mitchell's own willingness to pay considerably more for nonstop flights - will put upward pressure on prices.

Mitchell warns, too, that airline adoption of NDC will mean that indirect sellers will lose access to anything but "plain vanilla" rack rates - the airline equivalent of a price on a hotel-room door that no one actually pays.

Flint disputes that. Airlines will make their own decisions, he says, noting that some, such as Southwest, already decline to sell via third-party sites.

At best, it's unclear how IATA's proposal would alter the airline market - an argument for moving cautiously. Meanwhile, it's worth considering whether airlines' use of Big Data-style analysis could harm consumers at the same time other uses help them.

Peter Fader, a marketing professor at the University of Pennsylvania's Wharton School, suggests concerns such as Mitchell's are exaggerated.

"I think there's a tendency to assume that if we reveal more information about ourselves, we will be gouged," Fader says. But he says that airlines have a big incentive to avoid any appearance of price gouging. "If any business tries to squeeze as much revenue out of you as possible in each transaction, they're doomed," he says.

Flint says consumers have long shown a willingness to exchange personal information for tailored offers or discounts, both online and through loyalty cards.

"People are voting with their phone numbers and their information that they're comfortable with this," he says.

Are airfares different? CVS asks my phone number, but charges everybody the same price for toothpaste. Airlines, to avoid empty seats, have turned price discrimination into a high art.

Big Data isn't inherently malevolent or benign. It's just a tool that needs to be used mindfully, or we could, on occasion, be unpleasantly surprised.


Contact Jeff Gelles at 215-854-2776, jgelles@phillynews.com, or @jeffgelles. Read his blog at www.inquirer.com/inquiringconsumer.

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