The lodging industry has, along with all other segments of U.S. business, become more adept at using AI for their everyday needs. This focus includes many areas, such as operations, marketing, reservations, buying, social media and customer service. All these are areas that could benefit from AI. However, one aspect of AI’s impact on online travel agencies and their business model has been given little attention.
Currently, around 20 percent of hotel reservations are done through an OTA. This equates to approximately 325,000 reservations per day made through an OTA. This percentage is relatively constant over the last few years, as the OTAs managed to keep their market share despite the increasing number of guests booking their hotel rooms online. This chart shows the U.S. bookings for each rate category from October 2016 to date.
Deloitte conducted a survey on upcoming holiday travelers and found that GenAI adoption was predicted to increase from 8 percent last year, when the holiday season began, to 24 percent by this coming holiday season. This is up from only 16 percent for 2024. The use of GenAI by all generations surveyed increased, especially among millennials (31%), and Gen Z travelers (30%). The use of GenAI is expected to continue increasing in coming years.
Future implications
Who will benefit from this shift in technology, when AI is more integrated into all the aspects of a traveler’s decision making process, including choosing a hotel? Will it be the OTAs, or the brands, and hotels themselves? There is currently a heated debate within the industry about what this will mean for investors, brands and hotel owners. There are generally two camps of thought. First, the OTAs are weakened significantly by AI platforms. Second, the OTAs have a better position than now. Both sides have compelling arguments.
The fact that young and sophisticated travelers are more likely to be attracted by AI platforms, as they “re-learn”, where the best deals can be found, supports the idea that AI platforms could negatively impact the OTAs. It is not a stretch to imagine that, if this proves true, the booking landscape for hotels (and airlines) will resemble what it was like 20-25 years back when the OTAs were first introduced. If AI platforms start to offer loyalty programs, both for individual customers and bulk purchasers, this could also change booking patterns.
AI is expected to enhance OTAs’ standing, and this view is backed up by the fact that OTAs have been in the industry for over 20 years. They can leverage their experience with data from the past two decades. They are also well-known and useful to infrequent travelers, independent hotels and small chains who rely heavily on OTAs.
A reduction of the OTA fees would be welcome as hotels are struggling to offset their increasing operating costs. In the coming years we’ll see how this all shakes down and which OTAs will win the most hearts and minds among consumers.
