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Farecast is a new way of approaching online travel purchasing that could change how we all shop for online travel. This could be a real winner if they can get the average consumer to buy into the concept. 

It’s about time that there was some real innovation in the online travel space.  My personal experience when jumping between Expedia, Travelocity, Opodo and others is the difference is often marginal (a few bucks) and often a few bucks more expensive than going to the airline directly.  My established habit is to find the best flight using these online services and then to go direct to the airlines and buy the flight. Am I the norm here?

Anyway, Farecast analyses fare changes of airlines over a significant period to ‘predict’ what will happen with ticket prices between 75 airports and makes a 75% accurate (?) recommendation regarding what is likely to happen with that ticket price.  i.e. wait, or all time low – buy etc.

There are a number of elements and value adds to this site that I wouldn’t do justice to here. I recommend you check it out. But a few key points, Farecast covers the top airlines, can save you money, you book directly so keep frequent flyer miles that other sites take and there is no booking fee.  I good deal no?

Business Model:
As there are no FAQs within the Farecast site, it’s a little challenging to determine the exact long term business model.  What’s noticeable is there is a shortage of ‘advertising’ and there is no margin added to the purchase of airlines tickets as consumers buy them directly from the airline.

They may have relationships with the airlines which give them some kind of monetary benefits for tickets purchased , such as through an affiliate program but that is unclear. 

One neat and obvious revenue stream is what Farecast is calling Fare Guard – with Fare Guard you basically lock in the lowest price of an airline ticket between two locations for a week.  This pricing ‘hedging’ costs you $9.95.  Book your ticket with any airline at any price within the week and if there is a price increase against your locked in lowest rate, Farecast will give you a refund of the difference between the lowest price and your ‘guarded’ price.

Given many could purchase this ‘option’ and not exercise and many could purchase and the price may not increase, this is money for peace of mind and involves no outlay that I can see from Farecast.  Great business model no?  They may decide to take out ‘insurance’ which will cost a fee but I would be surprised given the quantity of deals they will be involved with…my guess is they have just run the numbers and believe they can make a decent margin.  They may well be right.

Some Core Functionality:

  • Fare Prediction
  • Arrow: An indicator showing the price ‘trend’ for the flights you are interested in.
  • Confidence: A percentage based on Farecasts accuracy of predictions for flights of the kind you are evaluating.
  • Average Fare Change.
  • Buying Tip: Farecast’s recommendation which is supposedly 75% accurate.
  • Fare Guard: The ability to pay $9.95 to lock in the price of the lowest priced ticket for this flight against a guarded rate.  This hedge mechanism will give you a check refund. See below for more details. 

Likes:
Any site which can give me some indication that I can wait 24 hours and save money is worth using.  It’s annoying to purchase a ticket to find the price has halved two weeks later, this may be the answer to that consumer frustration.

Fare Guard is also a great idea and I would even use it, especially for personal travel.

It’s nice and simple which is especially good given how complex it could be. 

Dislikes:
A few little dislikes:

  1. Will the average ‘Joe’ or ‘Joanne’ use this site?  Given the average is often a pretty low common denominator – I still wonder if its a little complex for the ‘average’. (Hopefully they don’t read this blog ‘cos I’m not sure I could cope with the hate mail)
  2. Business travelers are often price insensitive – they would prefer to buy the darn ticket then focus on the key business issues and emergencies.  If this is the case, Farecast may have to rely upon the occasional personal travel of the business user that has suddenly become more price sensitive, or the Joe’s and Joanne’s outlined above.  But, if they are regular business travelers, they will likely have significant air miles and may not be in the market for waiting around for price shifts.
  3. Farecast has something special here – I almost expected the site to look quite different to get the message home…but it looks similar to all the rest.  I guess there’s a fine line to be walked between being and looking too different.

My Virtual Investment:
With my virtual $1M, I would use $500K to predict Farecast’s success.

http://www.farecast.com/

Andrew
Founder
http://www.AdvisorGarage.com