I’ve always been fascinated by supply and demand because, in the travel industry, it explains almost everything. Long before AI, big data and sophisticated pricing algorithms, the businesses that consistently made the most money were usually the ones that understood demand better than everyone else.

What fascinates me today is that the relationship between airlines and hotels has quietly changed so much that the traditional rules of yield management are starting to work in reverse.

For years, the package holiday dominated the market. A tour operator would buy the airline seats, contract the hotel beds and then use one pricing strategy to balance the whole package. If flights weren’t selling, the operator could adjust the overall holiday price. If hotel demand weakened, they could absorb some of the cost because, ultimately, they controlled most of the supply chain.

Those days have largely disappeared. Today around 60% of holidaymakers still buy a package, but the remaining 40% or so build their own holiday by buying flights and accommodation separately. That sounds like a small change, but commercially it’s transformed the market because airlines and hotels are now playing two completely separate pricing games instead of one integrated one.

Majorca during peak school holiday dates in August provides a perfect example.

Hotel demand has become incredibly strong, helped not only by British and German visitors but also by a surge in Spanish domestic tourism during July and August. Hotels that traditionally aimed for around 80% occupancy are regularly filling completely, and some unfortunately continue to overbook because they know another customer is only a few clicks away if someone doesn’t arrive. Once demand consistently exceeds supply, there is very little incentive for hotels to discount unsold rooms at the last minute because someone else will almost certainly pay the asking price.

What I find much more interesting is what happens on the airline side of the equation.

Low-cost airlines still want to fill every seat they schedule, and once a flight programme has been committed many months in advance, it becomes surprisingly difficult to move aircraft somewhere else. Routes are interconnected, crews are planned, aircraft rotations are fixed and changing one destination often creates expensive operational consequences elsewhere.

So, while hotels are sitting comfortably with more demand than supply, airlines can find themselves discounting flights heavily because customers are switching to cheaper destinations, weakening demand for seats and forcing them to discount heavily to achieve even reasonable load factors.

That is exactly why I’ve been watching August prices with interest.

Flights from the UK to Majorca that were comfortably achieving over £200 during May and June are now appearing for under £100 across the board, despite August supposedly being the busiest period of the year. At first glance, that feels completely illogical until you realise the hotel and the airline are no longer trying to maximise the profitability of the same holiday and are optimising for two completely different businesses.

The comparison with May and June is equally revealing.

During those months, the Germans and Scandinavians top up British guests to provide solid demand, but there are still plenty of empty hotel rooms available. Hotels compete aggressively on price, making accommodation relatively cheap, while airlines can charge more because the total holiday cost remains competitive against destinations such as Portugal, Turkey or the Costa del Sol. Consumers don’t buy flights in isolation; they compare the total cost of the holiday, and today’s online comparison sites make those calculations almost instantaneous.

Ironically, this August you can see the reverse effect by looking at the Canary Islands.

Many of the same hotel groups operate there, yet the economics are almost inverted. Flights are priced at £250 because hotels don’t have enough demand and they are discounting rooms to fill them. The overall holiday price ends up looking similar to Majorca, but the profit is being generated by a different part of the supply chain.

From a consumer’s perspective, that creates an interesting opportunity.

If I were planning an August holiday to Majorca today, I’d probably secure my accommodation first, either by taking advantage of an early booking hotel offer or by finding an Airbnb before the owner fully appreciates how valuable those peak-season dates have become. Once the accommodation is secured, I’d simply wait, as history has shown me that the airline has far more incentive to discount than the hotel does, and with many hotels now offering fully refundable rates, there is relatively little downside if the market unexpectedly moves the other way.

Fortunately for the travel industry, relatively few people outside our sector spend their evenings thinking about yield management, so I doubt this blog will suddenly change consumer behaviour. Even so, I find it fascinating that after decades of airlines leading the pricing game, the balance of power in Majorca’s peak season has quietly shifted.

Today it’s Majorcan hotels dictating the economics, the airlines doing the discounting, and anyone who understands that relationship may well save themselves a surprising amount of money on their next summer holiday.