It’s no secret that competition in the market drives down consumer prices. But what if consumers can’t easily compare prices? Well according to a new study from Travel Tech, the reverse is true – prices go up.
The study found that if travelers can only get ticket prices and schedules from the airlines alone, it would cost consumers over $6 billion per year and 41 million travelers would be priced-out of flying. In essence, without the one-stop-shop for price comparison that Online Travel Agents (OTAs) like Expedia, Orbitz, and Kayak offer, we would pay more for our tickets.
This makes sense. Imagine trying to book your next flight and to compare prices you check American, Delta, United, Southwest, and AirTrans websites before making a purchase. Most of us would just give up and settle on the first reasonable price we see – which might not be the lowest. And once airlines know that it’s harder for travelers to find the lowest fares, they are incentivized to increase their prices. This also gives an advantage to the big airlines, as the smaller airlines, with potentially lower fares, are pushed further into obscurity.[pullquote]If travelers can only get prices and schedules from the airlines alone, it would cost consumers over $6 billion per year and 41 million travelers would be priced-out of flying. [/pullquote]
For over a decade, OTAs have compared prices on hotels and airlines and showed consumers the lowest prices around. Rather than you having to visit each airline or hotel website to find the lower price, these sites did it all for you. For consumers this means they can easily find the lowest fares. For airlines, it means they have to compete on fares, baggage fees, amenities, and other features.
But, the only way these systems work to benefit consumers is if the pricing data is readily available. And some businesses want to stop price comparison sites from accessing this information.
With airline profits at an all-time high – up to $25 billion for 2015 you would think that airlines wouldn’t want to mess with success, by stopping OTAs from comparing and showing you the lowest prices. But with a possible windfall of $6 billion, they seem determined to try. Travel Tech’s new study confirms our suspicions with an economic analysis of the upside for airlines and hotels if they can hide their prices form OTAs.
Lower priced tickets have opened up the world to more than just the elite. To ensure we don’t have to pay more to travel, let’s pay attention and respond if airlines move to remove their prices from comparison websites.