How Much Should Your Flight Cost? Consumers Misestimate The Cost of Airfare By Almost 50%

Patrick Surry - Jan. 31, 2016

Summary:

  • We surveyed over 7,000 US consumers to measure their expectations about the cost of airfare

  • A typical consumer misestimates round trip fares by more than $200 or almost 50% above or below the actual price reflecting broad uncertainty about how much to pay

  • On average, Mexico and the Caribbean are almost 30% more expensive than what consumers expect while California and Hawaii are about 10% cheaper than expected

  • Consumers in the Northeast made the most accurate estimates on average; those in the West were least accurate

  • The degree of uncertainty reduces slightly for more popular destinations

  • To find out how much you should pay, download the new Hopper app or check out Hopper’s reports online

Analysis

When shopping for flights, most travelers will comparison shop for about two weeks because they’re hoping to find that magic price that meets their expectation of how much they think it should cost. At the end of the two weeks, airfare typically rises an average of about 5% and the travelers ends up booking almost out of a sense of frustration with the process.

We decided to conduct a survey to see if consumers have accurate expectations about the cost of airfare. It turns out most consumers have no idea how much they should pay which is probably why flight shopping is such a frustrating process. In order to conduct the survey, we used Google’s consumer survey tool to ask 7,214 respondents in four US regions (Northeast, South, Midwest and West) how much they would expect to pay for round trip flights to nine destinations - New York, Las Vegas, Florida, California, the Caribbean, Mexico, Hawaii, Europe and Asia. Respondents selected one of five price buckets for each destination. Figure 1 shows the amounts by which people over or under estimated actual trip cost. For example, you can see that over 4,000 people below the correct price by between $200 and $300 (5th bar from the left). It shows that the spread of error is very large with people over or under estimating cost by as much as $600 or $700. The average size of error was about $200 which is about 50% of the cost of an average trip. histogram

Figure 1: the amounts by which people over or under estimated actual trip cost

Figure 2 shows how consumers over or under estimate prices by region. For example, the left corner chart shows what people in the midwest, northeast, south, and west expect to pay for a trip to New York. The chart shows that those from the northeast expect low prices while those from the west expect to pay the most. All regions over estimate prices to Asia. The results show some expected variation between region, e.g. respondents in the Northeast expect a lower price to New York than those in the West. There is also clearly high uncertainty about prices as evidenced by the broad spread of responses across price buckets for almost all destinations.

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Figure 2: Distribution of price estimates for each destination based on respondent region.

  Due to the fact that most consumers vastly overestimated or underestimated the cost, the group average is actually surprisingly close to the actual cost. When calculating the average, the consensus expectation (green dot) is within 10% of the actual good deal price for the majority of destinations for all regions except the West (Northeast 6 of 9 within 10%; Midwest and South 5 of 9; West 2 of 9).  While this is an interesting fact, it does not help consumers with their individual purchases since we don't buy tickets as a group. chart 1

Figure 3: Comparing expected prices, shown in green with central consensus (dot) and uncertainty (standard deviation; bar) along with the actual weighted average good deal price (red).

Don't stress if you're one of those people who aren't sure how much you should be paying for your flight. The new Hopper app or Hopper's reports online will always tell you how much you should expect to pay.

Methodology

In order to conduct the survey, we used Google’s consumer survey tool to ask 7,214 respondents in four US regions (Northeast, South, Midwest and West) how much they would expect to pay for round trip flights to nine destinations - New York, Las Vegas, Florida, California, the Caribbean, Mexico, Hawaii, Europe and Asia. Respondents selected one of five price buckets for each destination as shown in Figure 1.  The regions break down as West (CA, AK, WA, OR, HI, ID, MT, WY, NV, UT, CO, AZ, NM), Midwest (ND, SD, NE, KS, MO, IA, MN, WI, MI, IL, IN, OH), South (TX, OK, AR, LA, KY, TN, MS, AL, FL, GA, SC, NC, VA, WV, MD, DC, DE) and Northeast (PA, NY, NJ, ME, VT, NH, MA, RI, CT). The flight data presented in this analysis comes from Hopper’s combined feed of Global Distribution System (GDS) data sources which includes about 10 million queries and 1 billion trips per day. Good deal fare is represented by the 10th percentile prices.  For example, if the 10th percentile price is $800 dollars, it means that only 10% of trips are priced at or below this price.

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