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.

Findings

Google Is the Real Gatekeeper — Not Expedia

The most consequential number in this study is 77.4%. That is the share of respondents who rely on internet search as their primary method for researching and booking vacations — a figure so dominant it reshapes how every other finding should be read. Travel booking companies came in a distant second at 9.4%, barely edging out friend recommendations (8.8%) and lapping AI assistants (4.4%).

What this means in practice: Expedia is not competing primarily against Booking.com or direct hotel websites. It is competing for visibility inside Google's search results. Google Flights and Google Hotels have become the de facto discovery layer for U.S. travelers — providing price-timing intelligence and comparison features that make search the natural first step before any booking decision. Expedia must win on the search results page before it can win the booking itself.

The AI figure deserves special attention. At 4.4%, AI assistants rank last among all planning methods — but that number almost certainly understates where the market is heading. Phocuswright's latest research shows 56% of active U.S. travelers used AI for planning, booking, or in-destination help in the past twelve months, up from 33% a year earlier, with every age group posting double-digit gains. Expedia has already launched AI Filters and Property Q&A as beta features on its app — but the gap between study respondents' current behavior and broader market adoption signals a narrow window to establish AI as a genuine booking pathway before it becomes table stakes.

Price and Flexibility Are the Two Levers That Could Shift Bookings

When asked what would push them to book through a travel company rather than directly with an airline or hotel, respondents delivered a clear verdict: lower prices (33.3%) and easier changes or cancellations (23.1%) are the top two drivers. Together they represent more than half of all selections across the question — a concentrated signal that cost and flexibility are where OTAs must prove their worth.

The problem is that external evidence suggests OTAs are underperforming on both. Major hotel chains including Hilton, Marriott, and IHG have successfully negotiated terms allowing them to offer lowest rates exclusively to loyalty members on their own channels — a structural disadvantage for OTA price competitiveness. And on flexibility, documented consumer complaints about Expedia paint a troubling picture: multiple cases of customers waiting months for promised full refunds and ultimately having to dispute charges with their credit card companies to recover thousands of dollars.

Only 4.8% of respondents said nothing would make them book through a travel company — a small but instructive group of firm direct-booking absolutists. For everyone else, the door is at least theoretically open. The question is whether OTAs can deliver credibly on the value propositions consumers say they want.

Bundling Is a Structurally Defensible OTA Advantage

The ability to bundle flights, hotel, and car together ranked third among OTA conversion drivers, cited by 22.2% of respondents. That may sound modest — but global consumer data confirms it reflects a meaningful and accelerating preference shift, not a marginal feature.

A 2024 study of 10,000 global travelers by eDreams ODIGEO found that 84% of travel shoppers now prioritize having multiple options to compare before booking — and multi-airline bookings on that platform have grown more than 105% since 2021. The share of travelers who don't consider multiple options at all has dropped from 17% to just 3% over the same period. Comparison and combination are now the default travel shopping behavior.

Reviews and ratings from the travel company itself were cited by 16.5% of respondents as a reason to use an OTA — a reminder that platform trust, built through verified peer feedback, remains a meaningful differentiator even as travelers express ambivalence about OTA experiences overall. Bundling and reviews together represent the parts of the OTA value proposition that airlines and hotels structurally cannot replicate on their own channels.

OTA Sentiment Is Polarized — and That's a Two-Problem Story

The open-ended responses reveal a user base that is genuinely split. Among the 154 respondents who answered the experience question, those who have used a travel aggregator show a modest negative skew in their overall association with OTA use (mean score -0.24 on a -1 to +1 scale, p=0.014). The distribution is polarized, not normally spread — meaning experiences at the extremes are pulling the average, not a general mild dissatisfaction.

Positive experiences cluster around convenience, successful hotel bookings, and rewards programs — with some respondents specifically citing Expedia's points accumulation as a reason to keep using the platform. Negative experiences center on refund failures, difficult cancellation processes, and customer service delays that leave travelers feeling trapped between the OTA and the hotel or airline.

This polarization matters strategically because it means Expedia's retention problem and its acquisition problem are not the same problem. Retaining existing users requires fixing the specific failure modes — refund reliability, cancellation clarity — that turn advocates into critics. Acquiring new users, particularly the 77.4% who currently route everything through internet search without defaulting to an OTA, requires a different message entirely: demonstrating that the OTA layer adds price or flexibility value rather than just adding friction.

Personality data adds a targeting dimension to this picture. Respondents higher in agreeableness (r=0.249) and extraversion (r=0.222) are more open to OTA booking — suggesting messaging that emphasizes trust, convenience, and social proof will resonate with those segments. Highly sociable respondents, by contrast, are less likely to use internet search (r=-0.251) and more likely to rely on friend recommendations (r=0.214), pointing toward peer-network and influencer channels as more effective reach mechanisms for that group.

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.