Dynamic pricing has been in the headlines lately for all the wrong reasons. The first page of a Google search for the term comes up with nothing but articles about the recent Oasis ticketing debacle and regulatory efforts to reign in dynamic pricing or ban it altogether.
Now is probably a good time to clear up some facts about dynamic pricing for tour operators who might be worried they’ll end up like Ticketmaster by offering it.
In this post, we’ll take a look at what went wrong with Ticketmaster, why everyone’s so upset, and how tour operators can learn from the scandal and approach dynamic pricing responsibly.
What is dynamic pricing?
Simply put, dynamic pricing is a way of automatically adjusting prices based on demand. We go into this in detail in “dynamic pricing 101.” The main advantages of dynamic pricing are maximised revenue and improved capacity utilisation. Done right, dynamic pricing helps you fill seats, make more money, and reward early bookings with discounted rates.
Hotels and airlines have used dynamic pricing for years to adjust prices based on demand, seasonality, days of the week, and special events. One knock-on effect of the sold-out concerts, like Oasis and Taylor Swift, that caused the Ticketmaster backlash has been hotels drastically increasing their room rates and even cancelling existing reservations for the weekends of those concerts.
Ticketmaster & Oasis, “where did it all go wrong?”
In early September of this year, ticket sales for Oasis’ limited reunion shows generated huge demand and long virtual queues on Ticketmaster. The dynamic pricing model on Ticketmaster adjusted prices to match demand or “reflect market value,” as defenders of their policy have put it. Fans lucky enough to make it to the booking page after hours in the queue found tickets selling for more than double their original value.
The price hikes angered fans, spawned memes, and prompted calls for government regulators to step in the UK and Ireland. Ticketmaster, Oasis, and the practice of dynamic pricing itself faced harsh criticism.
Lessons for operators
The good news for tour operators using dynamic pricing is that it’s very unlikely you will ever be dealing with demand so extreme that it causes your ticketing system to set runaway price increases. That said, the incident underscores a few key principles of using dynamic pricing effectively and responsibly.
Pricing is a balance between customer satisfaction and profit
The Ticketmaster mess shows us one extreme end of the balance between price and customer satisfaction. By tipping the scales so heavily in favour of profit, Ticketmaster made customers feel like they had been scammed and damaged the reputation of the artists they were selling tickets for.
Transparency is vital
If fans had known that prices would be high due to demand and that availability would be limited, things may have gone differently. But a lack of transparency stoked outrage and made the situation so much worse.
When you look at your own dynamic pricing strategy, consider letting customers know why certain times and seasons cost more or have less availability. Far from angering customers, you might find this actually helps you communicate the value of peak hours and last-minute offers.
Prepare for demand surges
It’s very unlikely that your tour business will ever experience the kind of insane demand that the Oasis reunion generated. But factors like mass tourism, social media virality, and influencer patronage can all contribute to higher than usual demand.
This is usually a good problem to have, but it’s worth having a plan for it and knowing how your dynamic pricing settings will respond.
Know your OTAs’ policies
Oasis and their management have distanced themselves from Ticketmaster saying they didn’t know dynamic pricing would be used.
Again, while it’s unlikely that a third-party relationship will ever bring this much bad press to your business, it’s worth understanding how the OTAs you work with set their prices and allocate availability. This isn’t just about preventing a pricing fiasco, it’s good business sense.