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How “Drip Pricing” by Airlines Can Mask the Actual Cost of Travel 

How drip pricing by airlines can mask the actual cost of travel

Source: CBS News 

Travellers may mistake low advertised rates with inexpensive plane tickets because several airlines now offer “unbundled” fares. It is worthwhile for customers who are keen to secure the best ticket before the summer travel season begins to understand how “drip pricing” might raise the cost of travel.

In fact, according to travel experts, choosing the cheapest base cost is no longer the best way to obtain a good deal. This is due to the fact that airlines now frequently impose higher fees for “extras” like wifi, checked baggage, seat assignments, and snacks. According to Going.com founder and CEO Scott Keyes, “Nobody likes to feel nickel-and-dimed like the price they saw for a flight was a bait and switch,” as reported by CBS MoneyWatch.

Let’s think about this. When you first see the price of a flight on an online travel site, it may look enticingly inexpensive. However, the final charge may be significantly higher — equal to or greater than an all-inclusive trip — when accounting for the price of choosing your seat, checking your bags, and other add-ons.

This price approach, also known as drip pricing, is said to benefit customers by enabling them to pay only for the benefits they really value. It can increase an airline’s revenue, no doubt. Critics counter that this makes it more difficult to compare costs between airlines and ascertain the actual cost of flying.

Keyes links the origins of drip pricing to the start of airline fees for second luggage checks in 2008. This made it possible for full-service carriers to compete with low-cost carriers by providing a simpler, less expensive ticket.

“That lower headline price brought people in — then they started adding seat-selection fees,” Keyes stated. It’s a low-cost airline invention that full-service airlines have embraced for themselves and that the whole industry has imitated.

“It makes it very difficult”

Unbundling fares, however, has the drawback that it is more difficult for customers to compare the costs of tickets offered by other airlines, experts told CBS MoneyWatch.

“It makes it very difficult to find out what the all-in price will be,” noted Vicki Morwitz, a marketing professor at Columbia Business School and author of a study on customer attitudes toward drip pricing.

According to her research, customers typically choose the ticket choice that initially appears less expensive but really costs more when add-ons are taken into account. “Consumers make a mistake and spend more money than they needed to spend,” she said.

The president of IdeaWorks, a consulting firm that has provided advice to American airlines, Jay Sorensen, concurs that drip pricing complicates the process of evaluating airline ticket rates.

However, he continues to believe that it can help customers by enabling them to pay for the items they desire and discard those that are unnecessary. 

“The outcome is of course that it’s more difficult to compare between different products and airlines,” he said. “While that’s true, airlines, as profit-seeking companies, are under no obligation to make it easier to compare with their competitors.”

Sorensen compared the experience of booking airfare today to shopping for groceries.

“You roll in with your shopping cart, and as you walk through the aisles you toss stuff in your cart,” he said. “You buy a base fare, and as you go through the booking path you add things to the cart, like a checked bag, seat assignment, or pay to book a meal or other services,” he said. “That’s dramatically different from the way travel was once sold in U.S.”

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