It’s bad enough when you need an Uber just as the ball game is ending across town, and a $24 ride jumps to $68.
But now that $549 airline ticket to London can leap to $849 just as quickly, when the AI brain powering the airline’s revenue management system gets word that a Bad Bunny concert has been announced for Tottenham Hotspur Stadium during the same weekend you’re planning to visit.
Welcome to the new world of AI-driven “surge pricing” in travel. While airlines and hotels have been using technology and human analysis to price tickets based on seasons, holiday patterns, and competitors’ prices since the 1970s, artificial intelligence has revved up the game, giving airlines and hotels the confidence to change prices instantly, just like the many companies that already employ surge pricing regularly, including Uber, Ticketmaster, and Instacart.
With its ability to draw on an almost unlimited number of factors that could affect flyers and destinations—like weather, conventions, open seats at the moment, special events, historical sales patterns, even social buzz—AI can adjust the price of seat 16D in near real time.
When talking to investors and business media, airlines and hotels claim their use of AI dynamic pricing increases profits by anywhere from 5% to 30%. All you have to do is flip those numbers around to see that AI is leading you to pay between 5% and 30% more for your travel.
How AI-powered surge pricing is changing airfares
The leader of the trend in AI dynamic pricing in airfares is an Israeli technology company called Fetcherr. Its technology has been used by at least six airlines worldwide, including Virgin Atlantic and Delta.
In November 2024 Delta executives told investors that about 1% of the carrier’s seats were being priced dynamically using Fetcherr’s AI system as part of a multiyear rollout.
“We’re all in on this,” Delta president Glen Hauenstein told investors.
A Fetcherr blog post explains that the technology is even able to personalize pricing based on a customer’s “emotional triggers”—someone booking a flight during lunch hour at work, for example, may make different decisions than someone planning a trip from home in the evening.
And then there are the wildly random facts that AI can exhume and an airline can use to its advantage. Business travelers in Singapore, Fetcherr has found, are 70% more likely to book premium seats when it’s raining in their destination city. Who knew? AI did. (Fetcherr reps declined to be interviewed for this article.)
How AI-powered surge pricing is changing hotel rates
Hotels are using AI to change room prices on the fly too. Marriott, Hilton, and the international budget chain OYO all use AI to price rooms dynamically, based on factors like historical booking patterns, weather, and local events.
Some operators will employ AI that takes a customer’s individual booking history into account to offer certain rooms and add-ons like spa services and dining at prices the user has shown a willingness to pay.
OYO may be making the most aggressive use of AI in selling rooms, changing prices as often as a head-spinning 15 million times a day in response to a multitude of factors across its worldwide network.
Using AI dynamic pricing helped the company boost occupancy of its OYO Inn Dallas South from a failing 24% to a winning 92%.
To be fair, AI also allows travel companies to offer consumers some deals in pursuit of higher profits. Airlines using real-time dynamic pricing can drop the cost of that empty middle seat if it’s going to fly unfilled, and hotels can cut rates when AI predicts a slower shoulder season than usual because of, say, a heavily rainy forecast.
So what lies ahead?
In December 2024 several airline executives testified before a Senate Homeland Security subcommittee about AI-driven dynamic pricing and the use of personal information to set fares. Most of the airlines represented—American, Delta, United, Spirit, and Frontier—require passengers to disclose a range of personal information, including things like ZIP code, gender, and date of birth before seeing price quotes. (Only Delta does not.)
Senators asked the executives whether they would commit to not using personal information to set fares in the future.
None of the airline execs would make that commitment.
