OTAs Losing the Funnel

Executive summary

Online travel agencies are fighting for bookings on a battlefield they don't control. More than three in four Americans (77.4%) start — and often finish — their vacation planning through internet search, meaning Google owns the travel funnel before Expedia or Kayak ever enter the picture.

A new survey of 160 travelers makes the competitive challenge vivid: OTAs are a secondary consideration for most consumers, not a default destination. But the data also reveals exactly what could change that. Lower prices and easier cancellations are the two levers travelers say would move them off direct booking and onto an OTA — together accounting for more than half of all responses to that question. Bundling flights, hotels, and cars into a single itinerary ranks third, and global consumer research shows that preference is accelerating fast.

The picture gets more complicated in open-ended responses. Travelers who have used Expedia or Kayak are split: some are loyal advocates who cite rewards and convenience; others describe refund nightmares and customer service failures that sent them back to booking direct. That polarization means Expedia is running two different businesses — retention and acquisition — that require distinct strategies to fix.

Context

The online travel agency industry — led by Expedia Group and Booking Holdings — is worth hundreds of billions of dollars globally, yet it has always lived in a structurally uncomfortable position: dependent on the very airlines, hotels, and search engines it competes with for customer attention.

This study surveyed 160 U.S. consumers about how they research and book vacations, what would persuade them to use a dedicated travel company rather than going direct, and what their actual experiences with OTAs like Expedia and Kayak have been. The responses illuminate a consumer base at a genuine inflection point — shaped by shifting hotel commission dynamics, the rise of AI planning tools, and a post-pandemic reset of travel loyalty expectations.

The timing matters. Major hotel chains have spent the better part of a decade clawing back direct-booking share, reserving lowest rates for loyalty members and cutting OTA commission rates. Google has simultaneously built its own travel discovery layer — Google Flights, Google Hotels, and integrated search features — that positions it as the de facto first stop for trip planning before any OTA or direct-booking decision is made. And generative AI is now beginning to reshape how travelers discover, compare, and purchase travel: Phocuswright reports that 56% of active U.S. travelers used AI for at least one planning or booking task in the past year, up from just 33% twelve months earlier.

Against that backdrop, this survey captures what real consumers say they need from OTAs — and what experiences have already pushed some of them away. The 160-respondent sample skews toward digitally active, decision-making adults, making the findings particularly relevant for understanding the internet-first traveler segment that OTAs most urgently need to convert and retain. The free-response data adds texture that quantitative distributions alone cannot provide, surfacing the specific trust failures and loyalty program experiences that shape whether a traveler returns to an OTA or books direct next time.

Conclusion

The internet-search-first traveler is not going away — and neither is Google's structural ownership of the top of the travel funnel. For Expedia and the OTA category broadly, the path forward runs directly through the two things consumers say they need most: credible price advantage and reliable flexibility on changes and cancellations. Those are not branding problems; they are product and policy problems that require operational fixes before any marketing message will stick.

The bundling story is the most actionable near-term opportunity. It is the one value proposition OTAs can offer that airlines and hotels fundamentally cannot replicate on their own channels — and consumer demand for comparison-driven, multi-component itineraries is accelerating globally. Communicating that advantage clearly, inside search results where most travelers are already looking, is the highest-leverage move available.

The AI shift is the urgent longer-term watch item. The gap between this study's 4.4% AI-user figure and the market's 56% adoption rate will close quickly. OTAs that establish AI-powered discovery as a genuinely useful planning layer — rather than a chatbot add-on — will be positioned to capture travelers at the moment search and booking converge. That window is open now, but it won't stay open long.