AI and online travel: Disruption or reinvention?

Investing.com -- Artificial intelligence is changing the travel booking landscape, and Bernstein Research says the shift could redefine how online travel agencies operate, with Booking Holdings, Airbnb, and Expedia standing at the center of the transformation.

In a recent note, Bernstein analysts said that the travel funnel is already being disrupted by AI tools.

ChatGPT now hosts in-platform booking apps from Booking, Expedia, and Tripadvisor, while Airbnb plans to roll out its own natural language search by 2026.

Bernstein outlined three possible outcomes for the industry. The first, dubbed “AI-enhanced vertical-specific OTAs,” envisions traditional platforms embedding AI capabilities such as natural language filters and personalized recommendations.

This could make online hotel booking easier and raise penetration from the current 66%, but it may also erode revenue from paid placements, which contribute about 10% of total OTA revenue and roughly 25% of EBITDA.

The second scenario, “AI platforms as dominant traffic gatekeepers,” sees AI systems like ChatGPT or Google Gemini controlling most travel searches and directing traffic to preferred OTA partners under exclusive arrangements. Expedia’s stock rose 7% after being named as a ChatGPT partner but fell 10% once investors realized AI could compress take rates by limiting OTAs’ upselling power.

While OTA market share could rise, margins would likely shrink as AI takes over key decision-making.

The third and most likely long-term scenario, according to Bernstein, is one in which AI acts as an aggregator.

In that model, AI pulls live prices and availability from multiple sources, including OTAs, hotel brands, metasearch engines, and global distribution systems.

This approach could lift online penetration to 80%, masking some market share losses but pressuring commissions as price transparency improves.

Bernstein’s data shows that AI use in travel planning is already widespread, more than half of travelers now rely on AI tools for inspiration, but most still finalize bookings through established platforms.

Expedia’s web traffic from ChatGPT accounts for only 0.3% of total visits, though that figure has grown from nearly zero a year ago.

Surveys cited by Bernstein indicate that up to 40% of travelers would book directly through AI chat interfaces if live pricing and payment integration become available.

The brokerage also breaks down the potential financial impact. A 1% improvement in conversion rates could lift OTA EBITDA by 30%, while the loss of paid placement income could cut revenue by 10% and EBITDA by more than 20%.

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Expanding online penetration to 80% would add 20% to OTA revenues, while a 3% market share gain could add 17% for Booking and Expedia combined.

Bernstein flags diverging positions among the major players. Booking Holdings, trading at $5,419.87 with a target price of $5,433, remains most exposed because of its reliance on sponsored listings.

Airbnb, at $120.35 with a $165 target, is betting on developing in-house AI tools rather than integrating with external systems.

Expedia, priced at $223.83 with a $210 target, may benefit from its established B2B business as AI reshapes booking channels.

The brokerage adds that OTAs will survive the rise of AI but face significant pressure on take rates and market share.

Bernstein expects rapid innovation but a slow emergence of the industry’s new equilibrium.

The report notes that “the current outlook of OTAs effectively treading water in a slowly growing online market… with modest take rate gains is clearly wrong - but in which direction depends on the scenario.”

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