Wendy’s says that it has no plans to increase prices during the busiest times at its restaurants, clarifiying its stance on how it will approach pricing.Charlie Neibergall/The Associated Press
It was the talk of the social media chattering classes this week: Wendy’s was planning to implement Uber-like surge pricing for menu items at certain times during the day, at least according to comments the company’s chief executive officer had made.
But now the fast food chain is clarifying its stance, saying it’s not going to happen.
“Wendy’s will not implement surge pricing, which is the practice of raising prices when demand is highest. We didn’t use that phrase, nor do we plan to implement that practice,” the company said late Tuesday in a statement.
Instead, the company said, its use of digital menu boards “could allow us to change the menu offerings at different times of day and offer discounts and value offers to our customers more easily, particularly in the slower times of day.”
While the news stirred up some online commotion, surge pricing – also known as “dynamic pricing” – has for years been a common practice in several industries, such as hospitality, tourism, entertainment, retail and electricity.
Happy hours at bars? Paying more for hotels during peak seasons? Pricey concert tickets for popular artists? Those are all examples of dynamic pricing, and they stem from the basic business principles of supply and demand.
Here’s a look at industries that use dynamic pricing in ways you might not even realize.
Ride share companies
Uber's ridesharing app will let riders know that rates are being raised due to surge pricing.Nam Y. Huh/The Associated Press
Companies such as Uber and Lyft often raise the prices of rides during peak hours. Bad weather, rush hour or even a special event can cause demand to rise. When this happens, Uber ramps up prices to incentivize drivers to hit the road.
According to Uber’s website, “In these cases of very high demand, prices may increase to help ensure that those who need a ride can get one.”
The ride sharing app lets riders know that rates are being raised because of surge pricing, and riders can choose to pay or wait a few minutes to see if the rates go back down.
The airline industry
The airline industry has used dynamic pricing based on demand, seasonality, and flight times.Nathan Denette/The Canadian Press
Airlines have been using dynamic pricing for a long time. They adjust the prices of flights based on demand, flight times and even fuel cost fluctuations. Ticket prices often increase during peak travel seasons and decrease in off-peak seasons.
Carriers have employed tactics such as “resident fares,” which apply different fares for the same flight based on market conditions. As The Globe and Mail’s Erica Alini previously reported, Canadians have noticed different fares on the Canadian version of the United Airlines website, compared with the U.S. version.
This has been going on for so long that consumers are generally accustomed to seeing flight prices fluctuate. They’ve also become better at eluding airlines’ attempts to extract maximum prices. Savvy fliers who want to save money know, for example, to check prices at several different times, set up price alerts, take advantage of budget airlines or check the historical price trajectory of flights using tools such as Google Flights.
Hospitality, travel and short-term rentals
Price surging has also made its way into the algorithms of large vacation rental platforms such as Airbnb and Booking.com.DADO RUVIC/Reuters
Similar to airlines, the hospitality industry relies heavily on dynamic pricing to deal with seasonality or availability. The prices of hotel rooms fluctuate based on a variety of factors, such as occupancy rates, locations, the day of the week and periods of high and low demand.
Price surges have also made their way into the algorithms of large vacation rental platforms, such as Airbnb and Booking.com. Airbnb, for example, has a feature known as Smart Pricing that allows variable pricing based on demand, location and season.
Ticketmaster and the entertainment industry
Ticketmaster experienced a public-relations nightmare in 2022 when an unprecedented demand to attend Taylor Swift’s coming Eras Tour crashed its website.George Walker IV/The Canadian Press
In the entertainment sphere, U.S. ticketing giant Ticketmaster and its dynamic pricing system have often been criticized.
The company, whose fees and sales processes have aggravated bands and sporting fans for decades, experienced a public-relations nightmare in 2022 when unprecedented demand for Taylor Swift’s Eras Tour crashed its website. It has also drawn ire from fans of Bruce Springsteen, whose concert tickets fetched upwards of US$5,000 for choice seats.
Because of the Taylor Swift fiasco and complaints about expensive seats and service charges, Ticketmaster’s parent company, Live Nation, has also attracted the attention of some U.S. Congress members, who accuse it of monopolistic practices.
Canada’s Competition Bureau handed the company a $4-million penalty in 2019 after an investigation into allegedly misleading pricing claims in online ticket sales.
There are other examples of dynamic pricing in the entertainment industry. Canadian theatres infamously cashed in on the Barbenheimer bonanza last summer by raising ticket prices at some screenings. At a number of Cineplex locations in Toronto, a general admission ticket for either Greta Gerwig’s Barbie or Christopher Nolan’s Oppenheimer cost $1 more than a ticket for a slightly older release, such as Mission: Impossible – Dead Reckoning Part One.
More recently, Cineplex will be charging $1 more for a general admission ticket for Dune: Part Two to capitalize on the highly anticipated release and flood of moviegoers. AMC Entertainment also raised hackles online in 2022 when the U.S. theatre chain charged more for tickets of The Batman than other, less widely anticipated movies.
Amazon and e-commerce platforms
E-commerce platforms such as Amazon often use dynamic pricing via algorithms to optimize sales.DANIEL LEAL-OLIVAS/AFP/Getty Images
E-commerce platforms such as Amazon often use dynamic pricing to optimize sales, adjusting prices based on stock levels, customer demand and competitors’ prices. The use of algorithms for pricing is a reason Amazon has grown into the biggest online retailer. The site often changes prices multiple times a day.
In 2016, American investigative news outlet ProPublica outlined how Amazon uses dynamic pricing to guide shoppers to resellers that pay higher fees to Amazon. And buyers of simple household products often see prices that are 20 per cent higher than usual – unless they subscribe to the company’s Prime service.
Restaurants, bars and the service industry
Similarly to Wendy’s, fast food chain McDonald’s has also dabbled with dynamic pricing.Shannon Stapleton/Reuters
Bars and restaurants often make use of price-cutting strategies such as happy hours or daily specials. For example, Taco John, a chain based in Wyoming, coined the term “Taco Tuesday” in the 1980s when it began lowering the price of tacos on the slowest day of the week.
These businesses also raise prices when demand is higher. According to Bloomberg, the biggest pub operator in Britain introduced dynamic pricing for pints of beer in September, 2023.
Utilities
Consumers often pay more for hydro during peak hours because the cost of producing electricity changes on a variety of factors.Darren Calabrese/The Canadian Press
For another example of how dynamic pricing affects everyday life, just look to your monthly power bill. Consumers often pay more during peak hours, because the costs of producing electricity change based on the time of day, demand, shifting weather conditions and the costs of resources.
Many Canadian power companies make use of three types of price plans to accommodate those changes: Time-of-Use (TOU), Ultra-Low Overnight (ULO) and Tiered price plans. They use dynamic pricing to encourage customers to reduce consumption during periods of high demand. For example, Toronto Hydro prices are higher during peak times, such as weekdays between 5 p.m. to 7 p.m, while prices are lower on weekdays between 7 p.m. and 7 a.m., and on weekends and holidays.
With reports from The Associated Press, Erica Alini and Barry Hertz
Abigale Subdhan