I'm wondering about legacy web companies vs AI, big time.
It's possible AI democratizes internet traffic back directly to hotel brands themselves from the cutthroat big monopolistic players: Tripadvisor, Expedia, Marriott, etc, as you note.
I'm not seeing hospitality or many people talk about this, but there is something fascinating about the achilles heel of being software or web based only. The AI bubble is in legacy software and web, and the future is hardware.
If you're software *only*, it doesn't matter if you're a major player that adds AI to their website. Anyone can spin up an AI software model anywhere in the world now, so the future post-AI-bubble is physical AI and hardware. People won't be going to Tripadvisor to ask that AI, they will be using whatever hardware they use: watch, google home, smartphone, the television (the washer or fridge?).
I'm also attaching a clip that I think nails it, and it was confirmed at a product launch Tuesday, where there was a VS and AI round table. This is from a podcast that concurs: https://i.imgur.com/n1i2Ytd.mp4
They all said physical AI and hardware is the future, but the most wildly overhyped thing that doesn't make sense is humanoid robots. They in-depth explained why, and then Elon mentioned retiring Model S and X for the fremont factory to focus on his Optimus Robots. LOL
Also, a clip of the non-autonomous Optimus failing and falling when someone doesn't log out post demo. https://i.imgur.com/z4zfs8y.mp4
So the bubble is there, very much centered around legacy software and web.
Re "OTAs get pushed down the funnel → take rates compress" — How and why? Google chose to tax OTAs instead of kill them. Why wouldn't AI do the same?
OTAs "take" about $60-80B/year in revenue. Google gets a substantial portion of that by letting OTAs tax hotels and other travel operators, and then taxing OTAs by auctioning off user intent through ads.
I can see take rates compressing if the ones being "taken" from (eg. hotels and operators) gain more power as a result of the operators themselves being able to leverage AI and go direct to consumer, but that isn't what we're seeing.
The power is seems merely to be shifting from traditional search engines to AI engines. From one top of tunnel intent engine to another. Yes, AI will inevitably change the UI/UX flow and compress the booking funnel but that would suggest AI engines gain leverage. At no point do AI engines appear to lose leverage to operators and get disintermediated.
Yes, AI engines have the capacity to disintermediate the OTAs. So did Google, but they chose to tax the OTAs, and let the OTAs tax the operators. That's how Google extracts the maximum value from the travel industry. Why would they give that up now at the point where they gain even more leverage over the travel industry and operators? Altruism? Competition from other AI engines?
Despite OpenAI's early headstart, Google quick catch-up and existing distribution advantage will likely keep it on top. So, how exactly do we arrive at a point where Google extracts less from the travel industry?
There might be one way. If AI engines become autonomous agents that act more like a fiduciary, where they are responsible for procuring the best outcome for end users regardless of the commercial interests of the AI engine platform. Perhaps that reduces the platforms ability to monetize consumer intent. That may require a post-advertising world though, and that's certainly not a forgone conclusion.
the section on agentic travel bookings corresponds almost exactly to our thesis at Agentic Systems, a pre-seed stage startup at the AI Village in Germany.
Our platform allows travel suppliers to distribute to Agents directly, as an AI Infra layer that plugs onto their existing inventory APIs. We also provide them with multimodal, voice first seller agents that they can integrate into their existing web distribution.
We have spent a year building the platform, have deep domain and ai expertise, inventory access to 129 destinations, and have trained our model on the offer volume of 250k travel consumers. We are currently rolling out MVPs with name brand, paying B2B customers.
Would this be interesting for you or Altimeter? If so, which email should I send our deck to, in preparation of a call?
I'm wondering about legacy web companies vs AI, big time.
It's possible AI democratizes internet traffic back directly to hotel brands themselves from the cutthroat big monopolistic players: Tripadvisor, Expedia, Marriott, etc, as you note.
I'm not seeing hospitality or many people talk about this, but there is something fascinating about the achilles heel of being software or web based only. The AI bubble is in legacy software and web, and the future is hardware.
If you're software *only*, it doesn't matter if you're a major player that adds AI to their website. Anyone can spin up an AI software model anywhere in the world now, so the future post-AI-bubble is physical AI and hardware. People won't be going to Tripadvisor to ask that AI, they will be using whatever hardware they use: watch, google home, smartphone, the television (the washer or fridge?).
I'm also attaching a clip that I think nails it, and it was confirmed at a product launch Tuesday, where there was a VS and AI round table. This is from a podcast that concurs: https://i.imgur.com/n1i2Ytd.mp4
They all said physical AI and hardware is the future, but the most wildly overhyped thing that doesn't make sense is humanoid robots. They in-depth explained why, and then Elon mentioned retiring Model S and X for the fremont factory to focus on his Optimus Robots. LOL
Also, a clip of the non-autonomous Optimus failing and falling when someone doesn't log out post demo. https://i.imgur.com/z4zfs8y.mp4
So the bubble is there, very much centered around legacy software and web.
Re "OTAs get pushed down the funnel → take rates compress" — How and why? Google chose to tax OTAs instead of kill them. Why wouldn't AI do the same?
OTAs "take" about $60-80B/year in revenue. Google gets a substantial portion of that by letting OTAs tax hotels and other travel operators, and then taxing OTAs by auctioning off user intent through ads.
I can see take rates compressing if the ones being "taken" from (eg. hotels and operators) gain more power as a result of the operators themselves being able to leverage AI and go direct to consumer, but that isn't what we're seeing.
The power is seems merely to be shifting from traditional search engines to AI engines. From one top of tunnel intent engine to another. Yes, AI will inevitably change the UI/UX flow and compress the booking funnel but that would suggest AI engines gain leverage. At no point do AI engines appear to lose leverage to operators and get disintermediated.
Yes, AI engines have the capacity to disintermediate the OTAs. So did Google, but they chose to tax the OTAs, and let the OTAs tax the operators. That's how Google extracts the maximum value from the travel industry. Why would they give that up now at the point where they gain even more leverage over the travel industry and operators? Altruism? Competition from other AI engines?
Despite OpenAI's early headstart, Google quick catch-up and existing distribution advantage will likely keep it on top. So, how exactly do we arrive at a point where Google extracts less from the travel industry?
There might be one way. If AI engines become autonomous agents that act more like a fiduciary, where they are responsible for procuring the best outcome for end users regardless of the commercial interests of the AI engine platform. Perhaps that reduces the platforms ability to monetize consumer intent. That may require a post-advertising world though, and that's certainly not a forgone conclusion.
Interested to hear what others think.
Thomas, thank you for the insights as always.
I question whether the UX as a moat is being forgotten.
How many users go to an OTA because they enjoy the familiarity of using it?
How many users enjoy browsing for hotels and inspiration in the traditional OTA UX?
Do users want AI slop suggestions?
Do they want to read legitimate reviews (reason why AirBNB actually was successful - trust/reviews)?
Where will the AI get the data (reviews, hotel data, images etc)
Will users trust AI as a much as their favorite Virtuoso agent or Cruise Curator or PA?
Those are some questions we need to find answers to before sticking a fork into the OTAs.
I do think airline websites UX are horrendous and any vibecoded version will be better than their booking process :)
Hi Thomas,
the section on agentic travel bookings corresponds almost exactly to our thesis at Agentic Systems, a pre-seed stage startup at the AI Village in Germany.
Our platform allows travel suppliers to distribute to Agents directly, as an AI Infra layer that plugs onto their existing inventory APIs. We also provide them with multimodal, voice first seller agents that they can integrate into their existing web distribution.
We have spent a year building the platform, have deep domain and ai expertise, inventory access to 129 destinations, and have trained our model on the offer volume of 250k travel consumers. We are currently rolling out MVPs with name brand, paying B2B customers.
Would this be interesting for you or Altimeter? If so, which email should I send our deck to, in preparation of a call?
How do end users interact with the platform?
It can be used in a variety of ways:
1) The travel provider can run their own LLM based, multimodal, voice 1st Agent on their website or app
2) the platform can serve a custom GPT or app in an LLM Marketplace such as ChatGPT’s
3) The platform provides an MCP- (+ other protocols) Server that can be called by the large LLMs
4) the platform enables GEO/AEO measures so that existing LLM agents and crawlers are informed of the travel supplier’s inventory via the web.
5) the platform could also plug into the OTA backends for their agentic pipelines