"Dynamic Award Pricing" coming to MileagePlus

Discussion in 'United Airlines | MileagePlus' started by Wandering Aramean, Apr 2, 2015.  |  Print Topic

  1. Wandering Aramean
    Original Member

    Wandering Aramean Gold Member

    Messages:
    28,215
    Likes Received:
    61,743
    Status Points:
    20,020
    Details are scarce right now as to exactly what the implementation will be but a company spokesman confirmed to me earlier this afternoon that United Airlines expects to "begin introducing dynamic award pricing" within the year.

    The quote mostly avoids the issue, though being able to say that there are seats available more often - even when rates start to increase - is still good for marketing.

    Lots of open questions about what it means for partner awards, too.
     
    Espan, MX, Newscience and 1 other person like this.
  2. daninstl

    daninstl Gold Member

    Messages:
    1,288
    Likes Received:
    1,677
    Status Points:
    1,120
    It's like trying to hit a moving target with United. Sad.
     
    Counsellor, Espan, LIH Prem and 3 others like this.
  3. snod08
    Original Member

    snod08 Gold Member

    Messages:
    10,020
    Likes Received:
    13,064
    Status Points:
    16,520
    Thanks for the write-up on your website.

    This could have serious implications to making the program almost useless for an average spender (not the high spenders).
     
    Espan, MX, Newscience and 1 other person like this.
  4. edekba

    edekba Gold Member

    Messages:
    3,462
    Likes Received:
    3,783
    Status Points:
    2,145
    ... well that sucks
     
    stephenbgarvan, Espan and mht_flyer like this.
  5. mht_flyer
    Original Member

    mht_flyer Gold Member

    Messages:
    3,016
    Likes Received:
    6,664
    Status Points:
    4,670
    Agree not at all happy with this, hard enough to find saver awards on the flights I want now. My past award ticket was saver on way out, non-saver on way back. With less mileage accrual due to $$$ based RDM earnings, this will make this program less and less valuable to "most" people.
     
    stephenbgarvan, Espan and Newscience like this.
  6. mattsteg
    Original Member

    mattsteg Gold Member

    Messages:
    3,276
    Likes Received:
    5,543
    Status Points:
    4,170
    Competition for best in class?
     
    Espan likes this.
  7. NYCUA1K

    NYCUA1K Gold Member

    Messages:
    4,739
    Likes Received:
    5,086
    Status Points:
    4,270
    Adoption of a revenue-based system makes 'dynamic pricing' almost inevitable because it makes sense: award seat rates are made high when demand for revenue seats is high to discourage redemption, and when demand for revenue seats is low award seat rates can be decreased to encourage redemption. It is akin to the dynamic setting of costs for revenue tickets, but for award tickets it is based on maximizing "reward leverage" and minimizing "foregone revenue" as embodied in this principle:

    "The move toward dynamic reward pricing (and away from reward charts with fixed reward levels) is an effort to maximize reward leverage; the more demand exists for an airline seat, in a specific market on a specific day the higher its cost in terms of foregone revenue. This higher cost is reflected in higher point levels for redemption under dynamic reward pricing. Conversely, a seat in a low-demand market in an off-peak time of year costs the airline less in terms of foregone revenue; the airline can therefore afford to require fewer points for redemption."
    However, what is good for the service provider is not necessarily good for the consumer...
     
  8. okrogius

    okrogius Silver Member

    Messages:
    696
    Likes Received:
    853
    Status Points:
    795
    Except that's not always true. As a whole airline pricing is a way to segregate consumers and extract maximum price each segment is willing to pay.

    Example: say you have five seats available on a business heavy route. Your past booking history indicates you can usually get about two sales at 1500/seat, three seats at 700/seat, and all five at 500/seat. Within a day of departure there aren't many ways to segregate this demand (let's assume all travelers are staying the same week) - so the best option is to price at 1500. But you'll still end up flying with three empty seats - and it's better to get some miles off your books than none (here whether you're paying with cash or miles is a market segregator in itself). Award demand is typically leisure travel and thus isn't as price flexible as last minute business travel (i.e. won't pay standard award pricing).

    This example is relatively common. (It's technically possible that some dynamic pricing can keep the award price low in this case. But it's not fair to assume that miles price should be proportional to the cash price.)
     
    Counsellor, Espan, jetsetr and 3 others like this.
  9. NYCUA1K

    NYCUA1K Gold Member

    Messages:
    4,739
    Likes Received:
    5,086
    Status Points:
    4,270
    There are admittedly exceptions, so, clearly, is it is not always true. But the basic relationships between supply, demand and prices/costs are embedded in the principle, hence its appeal...
     
    Espan and Newscience like this.
  10. bmg42000
    Original Member

    bmg42000 Gold Member

    Messages:
    6,306
    Likes Received:
    9,392
    Status Points:
    8,845
    Counteract this with a switch to credit cards like chase sapphire preferred so you can switch your points to the airline that has the best deal for you .
     
    LIH Prem, Espan, Flyer1976 and 4 others like this.
  11. Thomask

    Thomask Silver Member

    Messages:
    562
    Likes Received:
    542
    Status Points:
    720
    Thinking negatively it sounds like a good way for UA to squeeze the miles out of us without any rules. Positively (I have to admit do not have many positive thoughts about UA starting about 2004.) But maybe will be able to save some miles that are not on routes that are not heavily sought after. What will it mean for Star Alliance partners where I mostly burn my UA miles?
     
    Espan likes this.
  12. Espan

    Espan Silver Member

    Messages:
    532
    Likes Received:
    981
    Status Points:
    750
    or cash back...
     
  13. Wandering Aramean
    Original Member

    Wandering Aramean Gold Member

    Messages:
    28,215
    Likes Received:
    61,743
    Status Points:
    20,020
    I think that this is the hardest of the open questions to answer because partners make this sort of thing very challenging. For ATI/JV partners/routes the fares can be relatively easily tied together at reasonable numbers. When other partners get involved things get much more challenging, assuming we're looking at a direct points->cash ratio.
     
  14. Newscience

    Newscience Gold Member

    Messages:
    14,694
    Likes Received:
    45,079
    Status Points:
    16,475
    Absolutely! UA is so intent on squeezing their customers for every possible $ of profit that it's hard to believe that flyers with a choice haven't gone elsewhere.
     
    daninstl likes this.
  15. 8MiHi

    8MiHi Silver Member

    Messages:
    1,015
    Likes Received:
    1,255
    Status Points:
    945
    If UA significantly reduces the value of RDMs through dynamic pricing, then Chase will get complaints and churn. Not a good way to treat a big revenue source.
    I expect that there will be some flights and upgrades on UA metal that are priced quite advantageously for MP members so as to retain the promise of a free flight just for getting the right credit card. I suspect though, that the most popular and desirable upgrades and flights will see higher redemption levels. I hope that UA does not go dark and make the awards as opaque as DL has chosen to do.
     
    NYCUA1K, mht_flyer and Newscience like this.
  16. Counsellor
    Original Member

    Counsellor Gold Member

    Messages:
    1,221
    Likes Received:
    1,619
    Status Points:
    1,120
    Or catching a falling knife.
     
    Newscience and daninstl like this.
  17. NYCUA1K

    NYCUA1K Gold Member

    Messages:
    4,739
    Likes Received:
    5,086
    Status Points:
    4,270
    Absolutely because that is one of the main rationales for pricing awards dynamically. It would be delusional to think that the airlines would have an alternate formulation when the simplest formula is that they'll make a lot of money from flights with features that are popular and flyers find desirable, which thus must cost more in cash or miles...
    Award charts probably won't have much use under dynamic pricing [electronic ones that can be updated in real time could be useful as a "guide"]. Old-fashioned award charts might, in fact, cause confusion or be the basis for people to gripe, therefore, UA will very likely discontinue them if or once they implement dynamic award pricing.
     
    Last edited: Apr 4, 2015
    8MiHi and Newscience like this.
  18. Newscience

    Newscience Gold Member

    Messages:
    14,694
    Likes Received:
    45,079
    Status Points:
    16,475
    If that is the case, it's high time to bail from the UA loyalty program!
     
    Counsellor and NYCUA1K like this.
  19. 8MiHi

    8MiHi Silver Member

    Messages:
    1,015
    Likes Received:
    1,255
    Status Points:
    945
    While I fear that you are completely right, I intend to foolishly hold out hope that the methodology used will be made public. I have no doubt that we will all get caught up in divining and debating it if they don't, so maybe its in MilePoints best interest if they do go dark. I also believe, perhaps naively, that even in a dynamic system there may still be room for some prix-fixe awards.
     
    Newscience and NYCUA1K like this.
  20. Counsellor
    Original Member

    Counsellor Gold Member

    Messages:
    1,221
    Likes Received:
    1,619
    Status Points:
    1,120
    Way ahead of you on this, but still have lots of miles to burn from the "less-bad old days".
     
    Newscience likes this.
  21. redtailshark

    redtailshark Silver Member

    Messages:
    1,041
    Likes Received:
    875
    Status Points:
    895
    Yeah, this is the sign of end for MP. There is no way dynamic pricing will be advantageous to any customer. At very best, one or two low-demand routes may be available at current redemption levels but for 98% of redemptions, more miles will be required. For a good proportion of them, vastly more miles will be required. Jeff Robbo's evidence proves exactly what happens when companies follow this route.

    Once that happens, and AA follows suit, there are only two solutions.

    1. Short run. Bail on the affiliate airline cards and spend hard on travel rebate cards.
    2. Long run. Support the OPEN SKIES petition to break open what has rapidly become the infernal cabal-controlled US airline consumer travel market. When a measure of real competition is restored, we will see better FFP value - whether from VOLARIS FREQUENCIA or revised MP, is up to the companies concerned....
     
    Counsellor likes this.
  22. chitownflyer
    Original Member

    chitownflyer Silver Member

    Messages:
    982
    Likes Received:
    1,013
    Status Points:
    870
    So United is now copying Delta's mystery award pricing scheme. Does anyone believe this change will be customer friendly and one we will like? In transactions, buyers need to have clear expectations as to the cost of a purchase. With dynamic pricing, there could be variations of the same product costing 3, 4, or 5 times as much depending upon the pricing algorithm. The current saver and standard award pricing provide clear guidelines as to product pricing. It is regretful what is happening to what once was one of the best US based airlines and its loyalty program.
     
    stephenbgarvan likes this.
  23. Desidivo

    Desidivo Silver Member

    Messages:
    100
    Likes Received:
    110
    Status Points:
    360
    I have been 1K for 3 years in a row usually with around 200K miles and around $50K per year. Last year I was at 50K by mid April. This year I am at 25K as I have moved most of international travel to lower cost international airlines with better service. I am enjoying the service on many of the international airlines that would not have selected just a few years ago. I think, I will make it to 100K this year but it will be close. To give an example, I was looking for a fight from EWR to NRT a few weeks ago. It was over $6K on United with 1 stop. I found another airline that had it for $3K also with 1 stop. The non stop was $9K. In the past I would not have looked for another airline. The result has been that all my international travel has been lower in cost on other carriers. Due to the cost savings, I will be able to travel more and save my company money (only worried that my company might cut my travel budget next year if I end up saving them too much money).

    I have come to the conclusion that most of the airlines are going down the same path. Those who have not, will be forced to do so. As such, I have modified my behavior accordingly as the current structure does not reward a traveler like me. I will not end up with as much usable miles as it will be split among multiple carriers but I am ok as rewards really are not that useful to me anymore. I will continue to fly United but it will no longer be my only choice for travel anymore.

    In short, this change is another proof point for my decision to no longer be loyal to United. I will fly them when they are lowest cost or for most of my domestic flights as I fly out EWR and most of the other airlines don't have nearly as many direct flights from EWR.
     
    mht_flyer, redtailshark and TAHKUCT like this.
  24. redtailshark

    redtailshark Silver Member

    Messages:
    1,041
    Likes Received:
    875
    Status Points:
    895
    The results of the type of customer choices above, and visible everywhere on FT and other boards, won't be evident to UA for a while, at least while the newly-coalesced UA/AA/DL cabal is able to control a majority proportion of capacity for domestic city pairs and engage in their normal covert price-fixing behaviors.

    But when more systematic aspects change, either driven by:

    a. Another severe recession on top of the current long-run stagnation
    b. Open skies and actual increase in choice.

    or more likely, a combination of both, then the airlines that have followed this path will not be forgotten by customers.

    Already, it's absolutely time to write in support of OPEN SKIES. Bear in mind, we are only at the beginning of the cartel phase. There's considerable hysteresis in the commercial aviation system and the effects are only emergent right now.

    Whatever, the Golden Age is over. The old-style FFP won't return but what might happen is better value and more product choice across the entire system. Lower J fares and especially Y+ fares that are more widely affordable will destroy the cabal. Wait until we can fly in J or F cabins on EK or QR from LAX to JFK in their 380s or 350s. Products such as UA ps and DL One-Under will be laughable in comparison, and when their supposed revenue-cash-cow fortress routes are undermined, they will have to rethink. By that time it will be too late for them but not for Jeff Robbo himself. He'll be retired by then and his gains will fun his purchased tix on EK anyway.
     
  25. redtailshark

    redtailshark Silver Member

    Messages:
    1,041
    Likes Received:
    875
    Status Points:
    895
    The results of the type of customer choices above, and visible everywhere on FT and other boards, won't be evident to UA for a while, at least while the newly-coalesced UA/AA/DL cabal is able to control a majority proportion of capacity for domestic city pairs and engage in their normal covert price-fixing behaviors.

    But when more systematic aspects change, either driven by:

    a. Another severe recession on top of the current long-run stagnation
    b. Open skies and actual increase in choice.

    or more likely, a combination of both, then the airlines that have followed this path will not be forgotten by customers.

    Already, it's absolutely time to write in support of OPEN SKIES. Bear in mind, we are only at the beginning of the cartel phase. There's considerable hysteresis in the commercial aviation system and the effects are only emergent right now.

    Whatever, the Golden Age is over. The old-style FFP won't return but what might happen is better value and more product choice across the entire system. Lower J fares and especially Y+ fares that are more widely affordable will destroy the cabal. Wait until we can fly in J or F cabins on EK or QR from LAX to JFK in their 380s or 350s. Products such as UA ps and DL One-Under will be laughable in comparison, and when their supposed revenue-cash-cow fortress routes are undermined, they will have to rethink. By that time it will be too late for them but not for Jeff Robbo himself. He'll be retired by then and his gains will fun his purchased tix on EK anyway.
     

Share This Page