LOS ANGELES -- Walt Disney Co.'s move to lift prices at Disneyland and its other theme parks on busy days was a novel step for the entertainment giant, but the news made perfect sense to Robert Crandall.
The former chairman of American Airlines employed a version of the same tactic nearly 40 years ago when Crandall pioneered "super-saver" fares, with ticket prices constantly being adjusted based on seat availability, passenger demand and how far in advance customers made reservations.
What Crandall did then, and what Disney is doing now, is part of what's called "dynamic" or "surge" pricing, and the practice is rapidly spreading in both the private and public sectors. Prices of baseball-stadium seats and metered parking spaces increasingly are shifting with the up-to-the-minute ebb and flow of supply and demand.
Disney and others took "the same principles we had and applied them to their businesses," the 80-year-old Crandall, now retired in Florida, said in an interview.
Under Disney's new policy announced last month, visitors to Disneyland and its other parks pay prices ranging from a 4 percent discount from regular prices on low-demand days to a 20 percent increase on the busiest days. Universal Studios Hollywood also has introduced a form of dynamic pricing.
They're hardly alone.
The ride-sharing services Uber and Lyft charge higher rates Saturday nights and at other peak times of demand. Sellers on Amazon.com and other e-commerce sites are using dynamic pricing more and more to match their inventories with demand. Prices of toll lanes on Southern California freeways move up and down in tandem with traffic.
"The time has come" for expanded use of rapid price changes to match demand, said Greg Loewen, chief executive of Digonex Technologies Inc., an Indianapolis provider of dynamic-pricing services. "It's one of the areas where companies, even big ones, have been making [pricing] decisions mostly on gut feel and past practice."
Advances in computer power, demand-tracking sensors, software with pricing algorithms and other technologies have made it easier for companies and government agencies to forecast how demand for their products and services will change and how quickly.
Crandall had an early advantage because American and other airlines had computer-reservation systems at the time, which they could exploit for pricing purposes.
For most other businesses, "until all the pricing data became so computerized it was very difficult to do that," said Alok Gupta, a professor at the University of Minnesota's Carlson School of Management who specializes in dynamic pricing.
"No other industry had that real-time information about their inventory," Gupta said.
Crude examples of dynamic pricing have been around for ages, of course, as anything "on sale" attests. Bars have lower-priced "happy hours" in the early evening. Retailers mark down prices of winter coats to clear space for spring fashions. Auto dealerships are more willing to haggle over prices for existing cars on the lot when the year's new models are about to arrive.
The stock market is another example; it's constantly adjusting the price of shares based on changes in demand caused by a company's actions or economic news.
But it's easier now for many types of firms to match supplies with demand, nearly in real time, and alter prices accordingly because "as the years have gone by computers have gotten faster and more powerful," Crandall said. "People have a lot more data."
Business on 03/22/2016