Once limited to certain travel and hospitality services — such as airfare and ride sharing — surge pricing is becoming more common in other businesses including restaurants, movie theaters and amusement parks. You might even run into it at the bowling alley or your favorite yoga studio. Let’s look at what surge pricing is, how it can affect your budget, and how you can avoid it.
What is Surge Pricing?
Also known as dynamic pricing, surge pricing is when businesses or service providers change the price of products or services in response to changes in supply and demand. When demand goes up, so does the price — such as the cost of an Uber during bad weather, or before and after special events.
Why is it Becoming More Common?
As businesses and consumers continue to adjust to a post-pandemic environment, both sides are facing economic uncertainty. Many businesses are still trying to become profitable again, while consumers are dealing with inflation and stagnant wages.
Dynamic pricing gives businesses an opportunity to cash in on periods of high demand. Plus, businesses have access to more real-time information on consumer behavior from apps and other technology, which allow them to predict higher demand and adjust prices to match.
How Does it Affect Consumers?
Surge pricing means consumers are paying more than they plan to on a variety of products and services. Because it’s unpredictable, dynamic pricing makes it more challenging for people to budget for things like birthday celebrations, family outings and travel.
How to Avoid Surge Pricing
Dynamic pricing is all about unpredictability, so you won’t always be able to get around it. But planning will help. Book travel, restaurant reservations and other reservations as far as you can in advance to lock in lower pricing. Also look into subscriptions or pre-paid passes for movie theaters, amusement parks or other entertainment venues you visit often. You can also make plans to attend destinations at off-peak hours for lower prices. And of course, you can ultimately vote with your wallet and choose not to give your business to establishments engaging in surge pricing.
