Generative AI Could Be the End of OTAs

As technology advances, so does the way we interact with our world, and nowhere is this more apparent than in the realm of travel booking. With the rise of AI technologies like OpenAI’s ChatGPT, we are witnessing a pivotal shift in the dynamics of the travel industry. This shift could redefine how hotels engage with customers and, potentially, how they negotiate their relationship with online travel agents (OTAs).

I’ve Seen This Show Before

The quest to own the user interface within the overall travel booking space isn't a new phenomenon. A few years back, search engines tried to streamline this space. When a user searched for travel they would get details right on the search results page.

Ultimately this was a surface level change. The actual flight and hotel information was still being fed and maintained through the OTA websites. Once a traveler wanted to get any more information or book something, they would have to click through to the OTA site. Very little actually changed in the process including - critically - owning the customer relationship.

The AI revolution seems different. Recent trends surrounding ChatGPT and its impact on OTA players demonstrate why.

Using Search to Understand the Customer

Search data is an incredibly powerful way to understand customer behavior and desires. Put simply, when we analyze the billions of daily search queries we can spot trends before they happen, by tapping into what people are searching for and how they’re searching for it. Search behavior has the power to show us what people really care about, since online searches demonstrate real intent and interest in a topic.

When we look at the searches for major OTA brands before and after the launch of ChatGPT, a new picture starts to emerge.

As seen in the chart above, in the months since ChatGPT was released, we’ve seen the average monthly searches for top OTA brands drop in half. This should be concerning for those companies as it shows a clear, declining interest in their brands. Instead of seeing the typical peeks from summer travel planning, we instead see steady, low levels of interest.

Digging Deeper: Net Searcher Sentiment

To understand the forces driving this shift, it’s one thing to know what people are searching for, but it’s another to know why they’re searching. We can also use search data to dig a level deeper and uncover the sentiment driving their behavior. Last year I introduced a new metric called Net Searcher Sentiment (NSS) in the peer-reviewed journal Applied Marketing Analytics. NSS is a cutting-edge metric that analyzes consumer sentiment using search data. NSS is built as a replacement for Net Promoter Score, relying on aggregated search data instead of surveys, which are prone to many well-documented biases. 

When we analyze the NSS of Booking.com, one of the major OTA players, we see that in the same period as above their NSS has dropped from essentially 0 to a score of -51.  This means that since the introduction of ChatGPT they went from having an equal amount of positive and negative sentiment to having negative sentiment outnumber positive sentiment by a margin of 51%. 

This drastic change in consumer sentiment could signal a broader shift in customer preferences. The OTA brands are losing favor, and with ChatGPT's record adoption rates, there's an opportunity waiting in the wings.

The Hotelier's Opportunity

While ChatGPT's meteoric growth may have come back to Earth recently, the technology's features are being woven into platforms where people conduct their daily work and live their lives. As this technology becomes more integrated in our day to day, we will come to rely on it more and more. 

An early addition to ChatGPT are the so-called plugins. These plugins allow third parties to build connections between their systems and ChatGPT. If you take a look through the library of available plugins, you’ll see offerings from many of the major OTA players already, but not with many hotel systems.

This presents an unprecedented opportunity for forward-thinking hotel brands to take the initiative. By integrating directly with AI giants like OpenAI, hotel IT leaders could bypass traditional OTAs and establish a more personalized and efficient booking process for consumers. Now is the time to experiment with this burgeoning technology, ensuring that APIs are ready for a more seamless, user-focused future.

Eventually, I expect the plugin system to fall to the wayside. And at that point, I would expect systems like ChatGPT to directly integrate with the appropriate third party systems and fulfill a traveler's request using the appropriate third party system based on their request. Ensuring your systems are able to connect to ChatGPT means that you don’t get lost in the wayside and have the opportunity to capitalize on this new customer funnel.

A Future Uncertain, Yet Promising

The era of ChatGPT and generative AI is upon us, and its ripple effects could be monumental for hoteliers. While the thought of losing a significant revenue stream like OTAs may seem daunting, it's essential to recognize the potential benefits that AI can bring.

The direct integration with AI platforms could lead to more direct bookings and a stronger connection with customers. The shifting sentiment among consumers away from traditional OTAs signifies that they are open to something new and more personalized.

In the face of this transformative technological landscape, hotel CTOs, CIOs, CISOs, and CDOs must think broadly and prepare for the change that's already at their doorstep. The AI-driven future may seem uncertain, but embracing this uncertainty and taking proactive steps to adapt might very well be the key to unlocking the next level of success in the hospitality industry.