Friday Dismal Thread

by Ted on July 29, 2005

I recently made a one-night trip from Houston to Chicago with very little notice. I managed to save almost $200 off of the lowest-price plane ticket by adding a hotel room at a Super 8 outside of Gary, IN, which I didn’t use.

A quick look at Travelocity shows me that it was no fluke- for brief trips with very little notice, it’s much cheaper to book a flight to Chicago if you book a room at a Super 8 at the same time. At the time that I originally wrote this post, Delta would sell a flight from Houston to Chicago for $616 without a hotel room, $340 with. If I needed to leave tomorrow, I could buy a ticket on American for $606 without a hotel room, or $350 with.

How does this make sense? I can imagine that, all other things being equal, it would be worth a few bucks to an underutilized hotel to boost its occupancy rates. They might gain a customer for the future. However, even if the hotel in question incurred no costs at all for a housing a guest, I see no way that the hotel could derive $200+ worth of benefit. I must be missing something obvious, but I can’t figure out what.

{ 2 trackbacks }

Right Reason
07.29.05 at 6:18 pm
How to get a cheaper flight -
09.07.05 at 8:35 am



Dirk 07.29.05 at 2:45 pm

This may be rational price discrimination based on a noisy signal about your unobservable willingness to pay. Most people who need to fly on short notice pay with their expense account and are therefore not price sensitive, hence the high fare. People staying at a Super 8 are a different group of customers and much more price sensitive, therefore the lower fare.

Or it may be a stupid screw-up by an incompetently designed pricing engine. The economist in me leans towards the first explanation, the behavioralist towards the second.


JR 07.29.05 at 2:46 pm

This is a clever way for the airline to discriminate between business and other travelers. It’s unlikely that the business traveler will make his own reservation or will hit on the idea of taking a room at the Super 8. So you charge them double. The person making his or her own reservation may be price-sensitive, so you give them this way to distinguish themselves from the business traveler without requiring a Saturday night stay, a 14-day advance, or whatever.


JR 07.29.05 at 2:47 pm

what dirk said.


Dirk 07.29.05 at 2:52 pm



Keven 07.29.05 at 2:53 pm

Could you sublet your hotel room?

But then again, who on earth would want a room in a Super 8 just outside Gary, IN.


David Moles 07.29.05 at 2:59 pm

Gary, eh? Is CBW suit rental included?


Brett Bellmore 07.29.05 at 3:06 pm

On the other hand, I just recently priced out a trip to the Philippines. $1240 for the ticket alone, $1260 for a long stay in a really nice resort, and $5300 if I booked a (not nearly so nice) hotel stay along with the flight.

I cast my vote for “stupid screw-up by an incompetently designed pricing engine.”


catfish 07.29.05 at 3:28 pm

I always reserve my hotel room and plane ticket at the same time for the reasons that you mentioned. My understanding has always been that Travelocity has some kind of contract with the hotels in which they must save their best travel packages for travelers who agree to stay in those particular hotels.

Beware, I recently booked one of these travel packages while going to a job interview. The place where I was interviewing agreed to pay for the hotel room, but not the plane ticket. The problem was that there was no way for me to get a receipt that split the cost of the hotel room and the cost of the flight. Neither the hotel company nor Travelocity would provide me with a breakdown so I could supply a hotel-only receipt. It was quite frustrating.


catfish 07.29.05 at 3:30 pm

By the way, I have noticed the price differential on many different ocassions, so I am positive that it is deliberate rather than a result of incompetence.


alkali 07.29.05 at 5:07 pm

keven writes:

Could you sublet your hotel room?

But then again, who on earth would want a room in a Super 8 just outside Gary, IN.

Definitely not the sort of people who you could trust as sublessors, that’s for sure.


gus 07.29.05 at 5:55 pm

I work at a hotel and I can’t figure it out. I gave up trying to understand why someone who walked in
off the street pays $99.00 up 139.00 per night depending on day. And someone with a reservation will be paying from 174.00 to 204.00


epist 07.29.05 at 6:33 pm

Why don’t you poke around a bit on the price engine? Is the difference the same in cases where other pertinent variables are different? Say, with a 14 day advance, in business rather than coach, etc? The pattern you see there might tell you if and how the engine is returning such a low price for the last-minute trips. Good to know tho- I’ll keep that in mind next time I have to fly immediately.


Buce 07.29.05 at 10:40 pm

Why do hotel prices differ? Because it costs less than $10 per day to “turn the room”–maid service, chocolates on the pillow, whatever. Anything above $10 is return on capital –debt service or earnings to equity. IOW, at $10.01, the owner is better off letting the room than letting it sit empty. Every hotel knows this, and acts accordingly. The true fancies say they never discount because they have reps to protect, but don’t believe them.


Fred Vincy 07.29.05 at 11:57 pm

I just saved a lot the same way on a one way trip to Boston. There were 5 or so hotels I could choose from that made my flight cheaper than without the hotel, so I don’t buy the idea that this has to do with Super 8 not appealing to business travelers. Bad software also seems doubtful. My guess is that something in Travelocity’s agreements with the airlines (or, more likely, the hotels) necessitates it.


Bill Humphries 07.30.05 at 4:45 am

Orbitz has the same program. I recently flew back to see family in Dallas, never cheap due to American Airline’s control of DFW (and the Wright Amendment.) R/T advance purchase fares from the Bay Area ran between $480 and $600.

An air package with a room at a Marriot a few blocks from my dad’s house was $411, so my girlfriend and I got a good deal, and my father’s dog didn’t wake us up at 4:30 in the morning.

The packages seem to be pitched at excursion travel, but given the number of hotel options offered around Dallas, a business traveler might find them useful too. But I priced a trip for a long weekend, not during the working week.


Zilch 07.30.05 at 6:58 am

Simple question:
do both airplane tickets have the same restrictions.
the $606 dollar one might be a (partially) unrestricted ticket, allowing for date change, refund and all, the other one might just be part of a promotion.
check the conditions before you make a comparison as you might find the $606 is for instance a full fare ticket, in which case airlines have to abide by certain rules (iata internationally, inside US is different i believe).
Just checking right now, seems delta has a fare $545.12 plus tax retrun on that route, which would be the $606 one (fare basis:Q0BNV). and the other cheaper fare might be part of a package arranged with the travel agent, Travelocity.

the logic behind it is that any class of service is gonna be composed of different fares, and they’d obviously rather fly you at $150 (which covers costs) rather than an empty seat.


jet 07.30.05 at 11:18 pm

Build your own airplane and stop overpaying to get strip searched and packed into a sardin can.


des von bladet 07.31.05 at 8:23 am

Nice idea, Jet, but I process external stimuli at rates that become a liability at any speed faster than walking, as any number of my frazzled co-drivers (“passengers”) will attest.

Also, I’m Yoorpean enough that communal transport continues to strike me as a very excellent idea — I’m off to Amsterdam next week to audition their nice trams, hoorah!


David Sucher 07.31.05 at 2:07 pm

You also have to be careful with reservation systems in terms of performance. Here’s my (bad) experience with Alaska Air.


John Quiggin 07.31.05 at 8:35 pm

it might pay to be careful, given Eszter’s recent experience. The airline might demand proof that you’ve checked in to the hotel before they let you board the return flight.

That would be rational if the aim is price discrimination.


'As you know' Bob 07.31.05 at 11:58 pm

Up at #11, Gus was noting that a last-minute walk-in off the street usually gets a better room price than the person who has made a reservation.

IANAEconomist, but my understanding is that if the hotel still has a room available, the clock is ticking for them – the hotel is running out of time to get some revenue out of it. Anything they get for it at the last minute is better than an empty room. Money coming in, better occupancy stats for their managers. And a walk-in is not likely to cancel – but a walk-in just might get back in their car and keep looking if the hotel tries to price-gouge them.


Tracy W 08.01.05 at 1:35 am

I’ll add another puzzler. I went to book a one-way flight from Christchurch to Wellington. The price was $180. For a return flight it was $150. For the same flights (same day, same time).

Now $140 one-way vs $150 return I could understand – you could make an argument about price-fixing. But any rational person, tourist or businesss traveller, faced with the pricing above would buy the return and fail to turn up at the airport for the return flight. (In the event, we changed our plans due to car problems and flew both ways.)

The sales agent couldn’t give me an answer and just kept repeating “well, it’s company policy and I don’t set the policy.”


pagoff 08.01.05 at 10:53 am

I flew last week at the last minute from Minneapolis to Seattle (one way) on NW airlines. The first quote at 10PM the evening before was about $620. On the way to the airport 8 hours later it was $215. No hotel required. The airlines I guess wanted to fill the last few seats and offered this pricing, perhaps in response to their competition.

It does nothing however to assure the consumer of value. Rather we are simply pawns in the game of airline roulette.

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