AI could help you book that next trip to Hawaii, or cruise in the Mediterranean. That's the hope for online travel companies such as Booking Holdings and Expedia stock — along with tech giants Alphabet and Meta — racing to offer AI-powered tools for trip planning.
A recently announced update to Google's Gemini AI chatbot promises to pull flight times and hotel check-ins straight from your Gmail inbox to instantly build an itinerary. Similarly, Expedia Group's newly unveiled Romie promises to build travel schedules and even offer tips within text group chats with friends. Booking Holdings, for its part, earlier this year rolled out several upgrades to its Penny AI assistant on Priceline.
Analysts say it is still early days for AI tools in travel. But the new products highlight how companies are racing to embrace generative AI technology, which researchers with Skift previously estimated as a $28 billion market opportunity for the travel industry. A key goal: build a top AI assistant that supports the industry's focus on "hyper-personalization" for customers, Richie Karaburun, professor of hospitality and tourism at the NYU School of Professional Studies, said.
"How can you personalize, how can you be efficient and convenient for customers, and in the end, how can you reduce costs?" he told Investor's Business Daily. Beyond that, there is the fear that "if you don't use it now, you are actually going be far behind."
Booking Holdings vs Expedia Stock: The Promise Of ChatGPT
Generative AI has captured the imagination of the travel industry since the launch of ChatGPT in late 2022. The large language model behind the popular chatbot can already produce plausible recommendations for restaurants or hotels when prompted with your destination, travel dates and interests. Researchers at Deloitte predicted in a recent report called "Facing travel's future" that a "new breed of travel intermediary will likely emerge: The GenAI agent, which turns wish lists into bookable itineraries."
A survey of more than 1,000 U.S. travelers by stock analysts at Bank of America in March found that 44% of respondents either had or planned to use ChatGPT for travel planning. And that's far from the only option for the AI-inclined traveler.
For instance, Facebook parent company Meta says its chatbot can find flights and recommend ideal times to travel. Google's Gemini chatbot similarly can offer things like restaurant recommendations, along with hotel and flight information.
Expedia's Romie And Google's Gemini Trip Planner
For online travel agencies such as Booking Holdings and Expedia Group, there is an opportunity to pair conversational AI with each company's suite of booking tools. Booking Holdings, for instance, last year launched an AI Trip Planner it said combined existing AI recommendation capabilities with conversational AI technology from ChatGPT creator OpenAI.
Expedia Group similarly leaned on OpenAI's technology to launch a chat feature for customers last year. The Romie tool is an expansion of Expedia Group's AI Tools. The parent company behind Expedia, Hotels.com and Vrbo described Romie as putting trip planning on "autopilot."
Romie can offer customized itineraries and adjust to changes driven by weather or other disruptions, according to Expedia's May 14 announcement. The product is starting with an alpha, or test, version on its EG Labs website for experimental products.
Google, meanwhile, highlighted its travel planner prominently at its I/O Developer conference on May 14. It will be part of an update to its Gemini Advanced AI offering that is expected later this summer.
While Gemini already offers vacation suggestions, the trip planner will include an interface with customizable tools. For instance, you can punch in what time you wish to wake up and let Gemini adjust your itinerary automatically.
Race For 'Top-Of-Funnel'
Expedia and Bookings are looking to land customers at the top of the travel sales funnel, as analysts describe it. That refers to the earliest steps of vacation planning. A lot of travelers start with a Google search, such as for flights to Italy or hotels in Las Vegas.
That means online travel agencies, or OTAs, often pay to appear in those results via sponsored listings. Analysts with Morgan Stanley estimate that travel is among the top five sources of paid search revenue for Google.
Gen AI could shake-up that relationship.
"The extent to which Google's leading data, reach and personalization lead to higher adoption of its GenAI tools could cause the OTAs to be more reliant on Google for traffic ... and negatively impact profitability," wrote Morgan Stanley analyst Brian Nowak in a recent client note. "That said, the extent to which Expedia's Romie or Booking's AI tools gain adoption, could lead to a higher mix of direct and repeat traffic ... and higher profitability."
Travel Stocks: AI As The 'Ultimate Concierge'
Meanwhile, travel companies are emphasizing their AI push to investors. During first quarter earnings call over the past month, internet stock analysts at Jefferies found that AI was mentioned most often by executives in the travel subsector, followed by e-commerce companies.
Booking Holdings led all internet companies with 17 mentions, according to Jefferies. On a call with analysts May 3, Booking Chief Executive Glenn Fogel said AI could bring more customers to its platforms. Fogel also believes that chatbots can cut down on how often customers need to contact a live agent.
"We believe GenAI will lower our customer service costs per transaction over time and improve the customer experience," Fogel said.
Airbnb, meanwhile, has focused its AI efforts so far on customer-service improvements, as Chief Executive Brian Chesky told analysts following the company's May 8 earnings report. That includes AI-powered prompts to help hosts more quickly respond to guests.
Airbnb also last year launched an AI-powered "anti-party" system designed to screen bookings for potential misuse.
But the company has broader plans, including creating the "ultimate concierge," Chesky told analysts. In November, Airbnb paid a reported $200 million to acquire the startup Gameplanner.AI.
Will Travelers Embrace AI?
The travel industry's embrace of AI goes beyond online booking platforms. Companies such as Alaska Air Group, Norwegian Cruise Line and Marriott International have recently highlighted AI tools to help customers vacation plan.
Karaburun, of NYU, said he recently turned to ChatGPT for some tips for a trip to a work conference in Italy. After adjusting his prompts to be more specific, he said he found the restaurant recommendations useful.
Still, AI agents won't be the answer for all travelers. Karaburun said companies will need to balance privacy and security as they seek more data to personalize offerings for customers. There could be also concerns about expensive trips falling victim to "robotic itineraries," Karaburun said.
"There will always be people who say I want the human touch, I want to talk to people," he added.
Booking Holdings As Top-Ranked Stock
AI-enabled travel planning is still in early stages. Richard Clarke, an analyst with Bernstein, wrote in a recent client note that "almost every major travel brand has announced some form of AI (powered) advisor, but most have struggled to integrate generative AI into a compelling use case for customers."
Expedia's Romie looks like a "step forward," but is still in an early stage, Clarke added.
Meanwhile, Expedia stock is looking to bounce back after sliding following its earnings report on May 2. Shares are off 27% this year after gaining 73% in 2023.
Booking Holdings is the top-ranked stock within the Leisure-Travel Booking Group tracked by IBD. BKNG stock has an IBD Composite Rating of 97. Airbnb is ranked fourth, with a Composite Rating of 90. EXPE stock ranks seventh in the group, with a Composite Rating of 58 out of 99.
Separately, Google ranks third in the Internet-Content Group tracked by IBD. Shares for the search giant have a best-possible 99 IBD Composite Rating.
