Investing.com – The online travel agency (OTA) sector is facing a “paradigm shift” that could prove more disruptive than the entry of Google a decade ago, according to a report from Bernstein. Analysts warn that while large platforms like Booking Holdings Inc (NASDAQ:BKNG) and Expedia Inc (NASDAQ:EXPE) successfully navigated previous challenges, the rise of generative AI threatens to compress margins and erode the “supply moat” that has long protected these industry giants.
Bernstein’s analysis notes that Google’s 2010 entry into travel was essentially an evolution of the existing metasearch model. It was a “top-of-funnel” auction that favored large, generalist platforms with high marketing budgets.
AI platforms, on the other hand, utilize high-context natural language search that delivers a narrow set of highly relevant results rather than a long list of sponsored links. This shift could diminish the cost advantage of scale, making direct hotel bookings or specialist options more competitive.
“The entry of AI platforms into travel is an entirely different prospect to Google,” the analysts noted. “Google adopted an existing model and refined it. AI platforms are likely to completely change the model”.
OTAs could be forced to increase investment spend while facing “meaningful disruption” to their take rates and marketing efficiency due to the changing landscape. Analysts caution that increasing online penetration is unlikely to offset these new headwinds instead of the growth seen in the 2010s.
The report highlights how previous pressure from Google already forced significant shifts in business models. Booking transitioned toward a “merchant model” to offer more competitive prices. But this came at the cost of EBITDA margins, which remain over 3% below 2015 levels.
Expedia pivoted heavily toward its B2B segment, which now accounts for more than one-third of its revenue, as its consumer-facing business struggled to gain room-night volume.
“AI isn’t just a disruptive force, it’s a paradigm shift,” Bernstein analysts concluded. The firm maintains “Market-Perform” ratings on both Booking and Expedia, but they suggest that terminal value risk remains the primary driver for these shares.
As AI tools become better at parsing qualitative data like reviews and room descriptions, the traditional informational advantage held by OTAs may continue to shrink.
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