Are You Paying Too Much for Your Hotel? Unveiling Price Discrimination and How to Fight Back
Have you noticed hotel prices skyrocketing lately? You’re not alone. What might seem like a simple post-pandemic surge in tourism could actually be something more insidious: price discrimination. The idea is simple: businesses charge different prices to different customers based on what they believe each customer is willing to pay. And it’s happening online, right now, potentially costing you a significant chunk of your travel budget.
My interest was piqued when colleagues on the West Coast began complaining about exorbitant hotel rates. Initially, I dismissed it as a natural consequence of increased travel demand. However, reports began surfacing accusing popular hotel booking websites of employing price discrimination tactics. The core allegation was that residents of affluent cities, like San Francisco, were being shown higher hotel rates compared to those in other locations. A study from Northeastern University researchers even suggested that some websites were using stored cookies to categorize users into pricing tiers, steering them towards more expensive options.
This raised a crucial question: is price discrimination truly happening, and more importantly, can we leverage this knowledge to our advantage and secure better hotel deals? To investigate, I embarked on an experiment, testing several popular booking sites to see if a simple tool, a Virtual Private Network (VPN), could be the key to unlocking lower prices.
Price discrimination hinges on the principle that some consumers are willing to pay more than others, especially when they are unaware of the disparity. It’s akin to a used car salesman assessing your financial situation and inflating the price accordingly. This practice, sadly, isn’t limited to used car lots; it’s pervasive across various online shopping sectors, with travel websites being particularly prone to it. Fluctuating flight and hotel rates that seem to change with each website refresh are telltale signs of this dynamic pricing at play.
While the exact algorithms and methods these companies employ to track user data and implement discriminatory pricing remain closely guarded trade secrets, the existence of these practices has become an open secret. One of the primary methods of tracking is believed to involve utilizing locational data derived from your IP address.
Fortunately, a VPN offers a powerful shield against this location-based price manipulation. By masking your true location and making it appear as though you are browsing from a different area, you can effectively trick these websites into offering you more favorable rates. With a bit of strategic thinking and effort, you can turn the tables and use their own underhanded tactics to your benefit, finding cheaper rates.
To rigorously test the prevalence of price discrimination in online hotel booking, I designed an experiment. I compared prices across six prominent online booking platforms: Booking.com, Kayak, Trivago, Expedia, Hotels.com, and Priceline. I searched for hotels in New York City for a specific date: Friday, March 21st, to Saturday, March 22nd, approximately one month from the day the search was conducted.
The methodology involved connecting to a VPN server located within the United States and then visiting each website using Chrome’s Incognito Mode. This was crucial to prevent cookies or browser cache from being stored between visits, ensuring a clean and unbiased search each time. The experiment was conducted on the same day, using VPN server locations spread across the U.S., including San Francisco, Salt Lake City, Phoenix, New Jersey, Miami, and Chicago.
The aim of this experiment was to determine the extent to which your IP address location, i.e., the area from which you are booking, influences the prices of hotels displayed. By blocking the collection of cookies, browser cache, and history, I aimed to isolate the location factor and rule out other variables that might affect pricing.
The results were a mix of good and bad news. The good news was that, generally, prices for most hotels remained relatively consistent across different VPN server locations. There were minor differences, sometimes just a few dollars. For instance, the Trump International New York might be listed at $836 from a Phoenix server and $839 from a San Francisco server. However, these variations were largely insignificant.
The bad news was that prices for some hotels, on certain websites, exhibited significant fluctuations based on the VPN server location. The most striking example was The New Yorker hotel. While prices for this hotel varied across all sites, the discrepancy was most pronounced on Trivago.
When searching for the same hotel while connected to different VPN servers, the prices varied dramatically. Connected to a Phoenix server, the price was $206. From a New Jersey server, it rose to $269. But from a San Francisco server, the price skyrocketed to $352! That’s a difference of $146 per night, a staggering markup of roughly 71 percent for San Franciscans.
Interestingly, the price appeared to stabilize if you took the additional step of becoming a Trivago member, a step I intentionally avoided for the purpose of this experiment.
A similar trend emerged with the Hyatt Grand Central hotel, which was priced at $199 per night when searching from a Phoenix server and $278 per night when searching from a San Francisco server, representing a 40 percent markup. This result was particularly indicative of price discrimination, as there was no mention of a special discount for Trivago members.
While other price discrepancies were less dramatic, they were still present across all tested websites, not just Trivago.
So, what’s the explanation for these price variations? The answer is multifaceted. Some of the price differences could be directly attributed to the location from which you are searching. Others might stem from special promotional rates offered exclusively to certain areas or mobile providers – which might explain the Trivago member rate for The New Yorker hotel. Furthermore, factors like the time of day you are searching or fluctuating hotel room availability can also play a role.
While I tried to minimize these extraneous factors by using the same VPN service, searching on the same day at the same time, and immediately rechecking results if I observed a discrepancy, these other determinants cannot be completely eliminated.
Despite these caveats, the results strongly suggest that the location from which you are searching is a significant determinant of hotel prices. This makes a VPN or proxy server a valuable tool for finding the cheapest hotel rates.
VPNs reroute your online traffic through an encrypted tunnel, making it appear as though you are accessing the internet from a different geographical location. This not only masks your home IP address but also provides the added benefit of anonymizing your online activities and bypassing restricted content.
The best VPNs offer vast networks of globally distributed servers, allowing users to connect and change their online locations with ease. Furthermore, providers like NordVPN and ExpressVPN have developed their own VPN protocols that optimize connection privacy, security, and speed.
When using a VPN to find the best hotel prices, simply connect to a server in a less affluent city and conduct your search from there. My experiment revealed that connecting to servers in either Phoenix or Salt Lake City yielded the lowest average hotel rates.
Experimentation is key. It’s worth trying searches while connected to multiple different VPN servers. States with lower to median average incomes, such as Mississippi, Arkansas, Alabama, and West Virginia, might be ideal places to search from if your VPN offers servers in those regions. Conversely, it’s best to avoid servers in areas known for high average incomes, like New York City, San Francisco, Chicago, and Los Angeles.
While a VPN is arguably the most effective tool for circumventing price discrimination, there are additional precautions you can take.
Most VPNs offer optional ad and tracker blocking services. Enable these features to prevent third-party trackers from identifying and profiling you.
Browsing in Incognito mode in Chrome, Private Browsing mode in Firefox, or similar browser modes is also essential. These privacy modes prevent your history, cookies, or cache from being logged or used to identify you, which could compromise your VPN protection if you’re not careful.
Most VPNs include built-in ad and tracker blocking features, which you should enable to prevent sneaky third parties from revealing your disguised location. If you prefer, you can also use a separate ad blocker.
By utilizing a VPN and implementing these supplementary measures, you’ll maximize your chances of finding cheaper hotel rates. Happy booking!
