Few things are more annoying than sitting next to someone on a plane who is boasting about how much less they paid for their seat than you did.
Don't feel too bad – you've probably just experienced surge pricing. Your fellow passenger booked and paid for their ticket when demand was much lower than when you did, and the airline simply adjusted the price accordingly.
It's a common practice among airlines and hotels, and we are all familiar with the concept of “peak” and “off-peak” tickets, be they seasonal or even relating to times of the day.
Surge pricing, or dynamic pricing, is expected to become commonplace everywhere from cinemas and theme parks to supermarkets and restaurants.
It is arguably as old as economics itself – prices are flexible and are set according to the current demand in the market. As demand for a product surges, so too does the price.
The UK's largest theme park operator, Merlin Entertainments, announced this week that visitors to the likes of Legoland and Madam Tussauds will be subject to surge pricing. They will pay higher prices on public holidays and lower prices on weekdays.
Merlin Entertainments' revenue jumped 8 per cent to £2.1 billion ($2.6 billion) last year, and one in four visitors to London went to one of its attractions.
The company had a particularly rough time during the pandemic because of its reliance on international visitors, and using surge pricing is a savvy business way to improve its profitability.
So, if demand is not as high as predicted on a warm summer's day, prices can drop immediately. Likewise, if demand surges on a wet day in November, prices will adjust appropriately, providing true flexibility to the company's pricing model.
Merlin Entertainment said in a statement that such a pricing structure “makes sure that the peak period experience is optimised by avoiding overcrowding”.
The company also argued that surge pricing affords visitors to its attractions greater choice over when they come and how much they pay.
“This approach clearly works because our guest satisfaction is at an all-time high,” a spokesperson for Merlin said.
“Surge pricing is just a form of price discrimination, which is endemic in our economy,” Professor Nick de Roos of Liverpool University told The National.
“In its pure form, it refers to the practice of selling two units of the same good at different prices. This could be to the same customer (for example, a quantity discount or buy two get one free) or to two different customers.
“Hotels and airlines are classic examples. Usually, the pricing practices of hotels and airlines are referred to as price discrimination, but the term 'surge pricing' seems to have become more common recently.”
Online search and travel company Skyscanner sees air fares like any other commodity – prices will be higher when demand is higher.
One hack the company recommends is booking on a Tuesday, because most airlines will launch their discounted seats on Monday night. Travellers can save 15-25 per cent on ticket prices by doing this.
“Air fare pricing is complex, and there are many factors that determine the cost, from the itinerary to the flexibility of the ticket and the cabin class,” Hugh Aitken, vice president for strategic flights and industry partnerships at Skyscanner, told The National.
“However, the key determining factor for the price paid is largely due to demand.”
Anyone who has taken an Uber is familiar with surge pricing. Demand for rides tends to increase during rush hour or when it is raining and people do not fancy getting wet waiting for a bus. When demand increases, so do the ride prices.
“Some riders will choose to pay, while some will choose to wait a few minutes to see if the rates go back down,” Uber says on its website.
It's the same principle that Scott O'Neil, the chief executive of Merlin Entertainments, was referring to when he said surge pricing will keep queuing times at attractions in check during periods of high demand. This is how the strategy helps “protect the guest experience”.
Flexible prices that react to demand make perfect business sense. They allows companies to minimise unused capacity and maximise unit profit.
But as technological advances allow dynamic pricing to expand across different sectors, some are wondering where its limitations might lie.
Limitations and downsides
Is there a point where surge pricing doesn't work?
Some argue that it occurs when the consumer feels ripped off and the transaction itself is not perceived as fair.
In 1986, three American behavioural scientists, Daniel Kahneman (who died this week), Richard Thaler and Jack Knetsch, stated in the American Economic Review that customers often found surge prices frustrating and annoying.
In their paper Fairness as a Constraint on Profit Seeking, the three academics, two of whom would go on to win Nobel Prizes, offered a group of participants the scenario of a hardware store that sold snow shovels for $15. But the morning after a snowstorm the store put up the price of the shovels to $20.
Most of the participants, 82 per cent, said it was “unfair for the hardware store to take advantage of the short-run increase in demand associated with the blizzard”.
However, the degree of acceptance of surge pricing very much depends on the product, the time and the place.
For example, when the US fast food restaurant chain Wendy's announced last month that it was considering introducing surge pricing, meaning its hamburgers would be priced at different levels at different times of the day, there was a severe backlash and social media was littered with calls for a boycott.
Wendy's rival, Burger King, tried to entice customers away with a reactive “no urge to surge” promotion.
However, as sure as a burger comes with fries, you can be guaranteed that many of those outraged consumers booked Uber rides or airline tickets that same day without a flicker of concern.
“That a company uses surge pricing itself may not be judged as unfair, depending on expectations,” Eric Dolansky, associate professor of marketing at Brock University in Canada, told The National.
“Norms play a huge role here: we expect fluctuating prices from airlines, gas stations and Uber, so we don't look at it as unfair. If Wendy's starts doing it, we bristle because food is not a sector in which we usually see this.”
Incentives and choices
Likewise, companies may try to placate customer outrage with seemingly valid reasons for using surge pricing.
Ticketmaster's dynamic pricing system came in for harsh criticism in 2022, after some tickets for shows by singer Harry Styles doubled in price. While fan groups complained of being ripped off, the company insisted surge pricing kept ticket touts out of the system.
“Like sports teams, artist representatives and promoters recognise the benefit of pricing tickets closer to market value,” Ticketmaster said in a statement to the BBC at the time.
And while consumers may baulk at some surge pricing, Prof de Roos believes there's a limit to how much power they have.
“If price discrimination or surge pricing is well designed, an individual consumer will not have an incentive to shop elsewhere,” he told The National, “and we would expect that pricing practices would become increasingly well designed, with better data and information-processing tools.
“However, if consumers are able to co-ordinate their behaviour, then this could have an impact.”
But there are also tales of co-ordinated behaviour exploiting loopholes in the surge pricing system to the detriment of consumers.
Last year, Australian magazine Drive claimed there was evidence that groups of Uber drivers had colluded to log off the app in certain areas at certain times, thereby reducing the number of available rides and creating a false spike in demand.
“And when the prices start to surge, they all log back on – usually once it’s past double or triple the normal fare, and off they go, they clean up,” one anonymous driver told the magazine.
Nonetheless, much of the consumer opposition to surge pricing, such as it is, usually comes down to transparency and a perceived lack of information.
Economic theory stipulates that price discovery (the ultimate price that a seller and buyer settle on before a transaction is made) is enhanced in markets where there is transparency. In other words, the buyer and seller have a high degree of market information.
The trouble is, in most retail transactions the consumer has far less information than the seller.
For example, a supermarket will have a much clearer picture of the demand for chipotle chilli pepper than its customers.
With the advent of technology such as electronic shelf tags and stock control AI, if demand spikes the supermarket can increase the price of the pepper in less time than it takes to sneeze.
Indeed, the change could be so quick and so subtle that the customer probably will not even notice.
“Surge pricing will likely become more sophisticated,” Prof de Roos said, “or at least, the automation of surge pricing will likely be more sophisticated.
“What is new is the combination of sophistication and automation, with the potential for widespread deployment.
“Consumers should expect surge pricing to play an important role going forward.”
How to get there
Emirates (www.emirates.com) flies directly to Hanoi, Vietnam, with fares starting from around Dh2,725 return, while Etihad (www.etihad.com) fares cost about Dh2,213 return with a stop. Chuong is 25 kilometres south of Hanoi.
More from Neighbourhood Watch
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Company%20profile
%3Cp%3EName%3A%20Tabby%3Cbr%3EFounded%3A%20August%202019%3B%20platform%20went%20live%20in%20February%202020%3Cbr%3EFounder%2FCEO%3A%20Hosam%20Arab%2C%20co-founder%3A%20Daniil%20Barkalov%3Cbr%3EBased%3A%20Dubai%2C%20UAE%3Cbr%3ESector%3A%20Payments%3Cbr%3ESize%3A%2040-50%20employees%3Cbr%3EStage%3A%20Series%20A%3Cbr%3EInvestors%3A%20Arbor%20Ventures%2C%20Mubadala%20Capital%2C%20Wamda%20Capital%2C%20STV%2C%20Raed%20Ventures%2C%20Global%20Founders%20Capital%2C%20JIMCO%2C%20Global%20Ventures%2C%20Venture%20Souq%2C%20Outliers%20VC%2C%20MSA%20Capital%2C%20HOF%20and%20AB%20Accelerator.%3Cbr%3E%3C%2Fp%3E%0A
The biog
Year of birth: 1988
Place of birth: Baghdad
Education: PhD student and co-researcher at Greifswald University, Germany
Hobbies: Ping Pong, swimming, reading
The Penguin
Starring: Colin Farrell, Cristin Milioti, Rhenzy Feliz
Creator: Lauren LeFranc
Rating: 4/5
Company Fact Box
Company name/date started: Abwaab Technologies / September 2019
Founders: Hamdi Tabbaa, co-founder and CEO. Hussein Alsarabi, co-founder and CTO
Based: Amman, Jordan
Sector: Education Technology
Size (employees/revenue): Total team size: 65. Full-time employees: 25. Revenue undisclosed
Stage: early-stage startup
Investors: Adam Tech Ventures, Endure Capital, Equitrust, the World Bank-backed Innovative Startups SMEs Fund, a London investment fund, a number of former and current executives from Uber and Netflix, among others.
The Sky Is Pink
Director: Shonali Bose
Cast: Priyanka Chopra Jonas, Farhan Akhtar, Zaira Wasim, Rohit Saraf
Three stars
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
NATIONAL%20SELECTIONS
%3Cp%3E6.00pm%3A%20Heros%20de%20Lagarde%3Cbr%3E6.35pm%3A%20City%20Walk%3Cbr%3E7.10pm%3A%20Mimi%20Kakushi%3Cbr%3E7.45pm%3A%20New%20Kingdom%3Cbr%3E8.20pm%3A%20Siskany%3Cbr%3E8.55pm%3A%20Nations%20Pride%3Cbr%3E9.30pm%3A%20Ever%20Given%3C%2Fp%3E%0A
Who has been sanctioned?
Daniella Weiss and Nachala
Described as 'the grandmother of the settler movement', she has encouraged the expansion of settlements for decades. The 79 year old leads radical settler movement Nachala, whose aim is for Israel to annex Gaza and the occupied West Bank, where it helps settlers built outposts.
Harel Libi & Libi Construction and Infrastructure
Libi has been involved in threatening and perpetuating acts of aggression and violence against Palestinians. His firm has provided logistical and financial support for the establishment of illegal outposts.
Zohar Sabah
Runs a settler outpost named Zohar’s Farm and has previously faced charges of violence against Palestinians. He was indicted by Israel’s State Attorney’s Office in September for allegedly participating in a violent attack against Palestinians and activists in the West Bank village of Muarrajat.
Coco’s Farm and Neria’s Farm
These are illegal outposts in the West Bank, which are at the vanguard of the settler movement. According to the UK, they are associated with people who have been involved in enabling, inciting, promoting or providing support for activities that amount to “serious abuse”.
The specs
Engine: 1.5-litre, 4-cylinder turbo
Transmission: CVT
Power: 170bhp
Torque: 220Nm
Price: Dh98,900
Springsteen: Deliver Me from Nowhere
Director: Scott Cooper
Starring: Jeremy Allen White, Odessa Young, Jeremy Strong
Rating: 4/5
Pathaan
%3Cp%3E%3Cstrong%3EDirector%3A%3C%2Fstrong%3E%20Siddharth%20Anand%C2%A0%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%3C%2Fstrong%3E%20Shah%20Rukh%20Khan%2C%20Deepika%20Padukone%2C%20John%20Abraham%C2%A0%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%203%2F5%3C%2Fp%3E%0A
Tax authority targets shisha levy evasion
The Federal Tax Authority will track shisha imports with electronic markers to protect customers and ensure levies have been paid.
Khalid Ali Al Bustani, director of the tax authority, on Sunday said the move is to "prevent tax evasion and support the authority’s tax collection efforts".
The scheme’s first phase, which came into effect on 1st January, 2019, covers all types of imported and domestically produced and distributed cigarettes. As of May 1, importing any type of cigarettes without the digital marks will be prohibited.
He said the latest phase will see imported and locally produced shisha tobacco tracked by the final quarter of this year.
"The FTA also maintains ongoing communication with concerned companies, to help them adapt their systems to meet our requirements and coordinate between all parties involved," he said.
As with cigarettes, shisha was hit with a 100 per cent tax in October 2017, though manufacturers and cafes absorbed some of the costs to prevent prices doubling.
Types of fraud
Phishing: Fraudsters send an unsolicited email that appears to be from a financial institution or online retailer. The hoax email requests that you provide sensitive information, often by clicking on to a link leading to a fake website.
Smishing: The SMS equivalent of phishing. Fraudsters falsify the telephone number through “text spoofing,” so that it appears to be a genuine text from the bank.
Vishing: The telephone equivalent of phishing and smishing. Fraudsters may pose as bank staff, police or government officials. They may persuade the consumer to transfer money or divulge personal information.
SIM swap: Fraudsters duplicate the SIM of your mobile number without your knowledge or authorisation, allowing them to conduct financial transactions with your bank.
Identity theft: Someone illegally obtains your confidential information, through various ways, such as theft of your wallet, bank and utility bill statements, computer intrusion and social networks.
Prize scams: Fraudsters claiming to be authorised representatives from well-known organisations (such as Etisalat, du, Dubai Shopping Festival, Expo2020, Lulu Hypermarket etc) contact victims to tell them they have won a cash prize and request them to share confidential banking details to transfer the prize money.
* Nada El Sawy
Mia Man’s tips for fermentation
- Start with a simple recipe such as yogurt or sauerkraut
- Keep your hands and kitchen tools clean. Sanitize knives, cutting boards, tongs and storage jars with boiling water before you start.
- Mold is bad: the colour pink is a sign of mold. If yogurt turns pink as it ferments, you need to discard it and start again. For kraut, if you remove the top leaves and see any sign of mold, you should discard the batch.
- Always use clean, closed, airtight lids and containers such as mason jars when fermenting yogurt and kraut. Keep the lid closed to prevent insects and contaminants from getting in.
Avatar: Fire and Ash
Director: James Cameron
Starring: Sam Worthington, Sigourney Weaver, Zoe Saldana
Rating: 4.5/5
Five famous companies founded by teens
There are numerous success stories of teen businesses that were created in college dorm rooms and other modest circumstances. Below are some of the most recognisable names in the industry:
- Facebook: Mark Zuckerberg and his friends started Facebook when he was a 19-year-old Harvard undergraduate.
- Dell: When Michael Dell was an undergraduate student at Texas University in 1984, he started upgrading computers for profit. He starting working full-time on his business when he was 19. Eventually, his company became the Dell Computer Corporation and then Dell Inc.
- Subway: Fred DeLuca opened the first Subway restaurant when he was 17. In 1965, Mr DeLuca needed extra money for college, so he decided to open his own business. Peter Buck, a family friend, lent him $1,000 and together, they opened Pete’s Super Submarines. A few years later, the company was rebranded and called Subway.
- Mashable: In 2005, Pete Cashmore created Mashable in Scotland when he was a teenager. The site was then a technology blog. Over the next few decades, Mr Cashmore has turned Mashable into a global media company.
- Oculus VR: Palmer Luckey founded Oculus VR in June 2012, when he was 19. In August that year, Oculus launched its Kickstarter campaign and raised more than $1 million in three days. Facebook bought Oculus for $2 billion two years later.
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3EName%3A%20%3C%2Fstrong%3ESmartCrowd%0D%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3E2018%0D%3Cbr%3E%3Cstrong%3EFounder%3A%20%3C%2Fstrong%3ESiddiq%20Farid%20and%20Musfique%20Ahmed%0D%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EDubai%0D%3Cbr%3E%3Cstrong%3ESector%3A%20%3C%2Fstrong%3EFinTech%20%2F%20PropTech%0D%3Cbr%3E%3Cstrong%3EInitial%20investment%3A%20%3C%2Fstrong%3E%24650%2C000%0D%3Cbr%3E%3Cstrong%3ECurrent%20number%20of%20staff%3A%3C%2Fstrong%3E%2035%0D%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3ESeries%20A%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EVarious%20institutional%20investors%20and%20notable%20angel%20investors%20(500%20MENA%2C%20Shurooq%2C%20Mada%2C%20Seedstar%2C%20Tricap)%3C%2Fp%3E%0A
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
