A Dozen States Pass Laws Targeting AI-Driven Travel Pricing

The travel industry has been a pioneer in this pricing strategy, with airlines first introducing dynamic models after deregulation in the 1980s to adjust fares based on demand and seat availability. Today, AI and machine learning algorithms can analyze vast datasets and update prices up to a million times per day, a far cry from the manual adjustments of the past. These new state bills target what critics label "surveillance pricing," where algorithms use a consumer's digital footprint—including search history, location, and even a device's battery life—to infer their willingness to pay and set individualized prices. The legislative push has been swift, with nearly 20 states introducing proposals to restrict or ban the practice since the beginning of 2025. Proposed legislation varies by state; New York has already passed an Algorithmic Pricing Disclosure Act, while California's "Fair Online Pricing Act" would prohibit using device data like battery status for pricing. A proposal in Pennsylvania specifically targets the use of surveillance pricing by rideshare companies. Industry groups like the Travel Technology Association argue that dynamic pricing is essential for managing perishable inventory, such as an unsold airline seat or hotel room for a specific night. They warn that these state-level restrictions could lead to higher operational costs and ultimately result in less competitive, "one-size-fits-all" pricing for consumers. Recent scrutiny has focused on major carriers like Delta Air Lines after it announced a partnership with AI-firm Fetcherr to help manage revenue, prompting questions from lawmakers. In response, Delta clarified its AI tools use aggregated market data rather than personal information to set fares, with human experts retaining final oversight. Consumer distrust of these practices is significant, with one study finding that 68% of consumers view dynamic pricing as a form of price gouging. A separate 2024 survey revealed that 47% of consumers believe dynamic pricing for air travel is unfair, with 46% feeling the same about hotel stays. This wave of state legislation aligns with a broader federal focus on price transparency, including the Federal Trade Commission's "Junk Fees" rule, which took effect in late 2024, requiring the total price to be displayed upfront for hotels and short-term lodging.