You know that you’re semi-retired from Travel retailing when you find yourself feeling sorry for Google.
However, Google is now caught between a tightening vice of consumers using AI Search from engines like Perplexity and ChatGPT to get answers more quickly, and European regulators imposing multi-billion-euro fines against Google for promoting its Flight and Hotel engines, which are designed to deliver this speed.
The core issue is that Google has been highly successful and holds a dominant position as the ‘Gatekeeper’ of search, with their 10 blue link technology that maximises profits by forcing travel customers to visit an average of 35 sites, review 141 pages of content, and often return to individual sites 2-3 times before booking.
This is an inefficient process, and Google rightly argues that their Flight and Hotel searches simplify the process for customers by comparing prices and summarising all options. However, so do Skyscanner and Booking.com, which Google openly prejudices by promoting its services more prominently and at a much lower cost.
The European Union has clearly had enough and introduced the Digital Markets Act (DMA) to empower its regulators to hold Google accountable. This has already issued preliminary findings that Google is unlawfully favouring its services over competitors through more prominent treatment, such as top placement, enhanced visuals, and filtering mechanisms, while competitors’ results are less visible or demoted.
Google is therefore facing the prospect of not promoting its services so prominently, or the prospect of Billions more in fines, and even the prospect of being forced to divest part of its services.
However, like many customers, the month view calendar Google Flights offers is a much quicker way to find the cheapest date and supplier for a route. So, we face an apparent dilemma. As we shift from a directory of links to more useful AI tools that help you reach an answer faster, who is authorised to provide these tools if Google isn’t, and how will the revenue be shared?
In my opinion, the answer is simple.
AI search engines will collaborate with the top independent comparison platforms, as direct relationships with asset owners, such as low-cost airlines like EasyJet, do not offer the price comparison feature that consumers expect. However, Trip.com’s Chinese ownership of Skyscanner may pose challenges for the UK’s most well-known flight comparison engine, potentially leaving an opening.
Similarly, Ice Travel Group, the UK’s leading package holiday comparison site operators, is finally facing increased competition with the launch of several new AI-based entrants, such as Hey Holiday and white-label technology specialists Travel Find Holidays.
However, the AI Engines will also negotiate with other “Trusted” sources, and how can the asset owner or airline not be the ultimate trusted source? This is why, when you search on Perplexity for flights from Manchester to New York, you are presented with links to both Skyscanner and the websites of the major airlines operating the route, allowing the customer to choose. However, it is ironically less clear than Google Flights’ price map, which shows prices for the month at a glance. This illustrates how regulators might hinder consumer benefits while claiming to promote consumer choice. It’s an interesting balance!
The other key element that will change is how search charges will be applied.
The very nature of AI Search and its requirement to deliver customers to the answer more quickly inevitably spells the end of “Cost per Click” and a shift to “Cost per Acquisition” or a revenue share, but how do the Engines negotiate if they must tell the truth about who has the best deal?
Just as Google Search is evolving, so are OTAS’ marketing expenditures.
On the Beach (OTB) led the way with their massive investment in “Above the line” TV advertising, aimed at increasing brand awareness and attracting customers directly to their brand terms on Google or ideally as a direct site hit, reducing their reliance on resort or hotel search terms.
This now seems a very wise move, given the current 30% decline in Google Advertising effectiveness that has hit the entire UK Travel sector this summer. The nature of paid search competition has led to an increase in the price of attracting clicks, despite a decline in conversions.
Therefore, companies that have not diversified their visits away from Google search face an urgent need to evolve their model.
Interestingly, the largest OTA, Love Holidays, has diversified by partnering with social media giants “Holiday Pirates”. There is no publicly available information about the volumes this white label is generating; however, as long as the pay-away revenue share remains lower than Google advertising costs, it will be a beneficial deal for both partners.≈≈
I believe we will see more deals of this nature as new AI-driven travel entrants emerge in the market, because they enable new businesses to concentrate on their strengths without becoming entangled in the operational, contracting, or bonding issues that these major OTAs manage effortlessly.
Predicting AI’s impact on travel is challenging, but I predict that we haven’t yet seen the AI Travel business of the future. Just as the internet revolution transformed everything, I think the AI Revolution—featuring ‘Digital Twins” that understand all a customer’s preferences and shop on their behalf—will fundamentally alter how customers engage with travel providers. Therefore, my investment funds will be directed into this sector, based on the assumption that new technology will soon partner with others to complete the work.