Episode summary
Will AI Start Making Your Hotel Reservations?
Thoughts on the Market (Morgan Stanley)
· · 5 min · Hosts: Steven Grahamling
Summary
AI agents could materially change how travelers search for and book hotels, and that would redirect a meaningful amount of spending in the $640 billion global hotel industry. Steven Grahamling says the lodging industry spends roughly $22 billion to $25 billion on marketing each year, while online travel agencies collect about $30 billion in fees, creating a combined $55 billion to $85 billion pool that AI could influence.
The central argument is that AI-powered booking will favor direct hotel bookings more often than traditional search does. In Morgan Stanley’s analysis of hotel searches across eight US destinations, traditional search engines sent travelers to official hotel websites only 13% of the time, while AI-powered searches did so 97% of the time. Loyalty programs matter even more: when the user was identified as a hotel loyalty member, all results pointed to official hotel sites, while an online travel agency loyalty member got only third-party results.
Grahamling says major hotel brands and their loyalty ecosystems are positioned to benefit first, with even a 1% shift from third-party platforms to hotel websites potentially lifting hotel owners’ EBITDA by roughly 0.1% to 0.5%. He expects margins to start benefiting in the second half of 2027, with additional gains in 2028, while online travel agencies remain relevant because of their inventory, loyalty, and fulfillment scale.
Key takeaways
- Steven Grahamling says AI could influence $55 billion to $85 billion of hotel marketing and distribution spending each year.
- Morgan Stanley found traditional search sent travelers to official hotel websites 13% of the time, versus 97% for AI-powered searches.
- Loyalty programs appear decisive: when the traveler was a hotel loyalty member, the AI results pointed entirely to official hotel websites.
- A 1% shift from third-party booking platforms to hotel websites could lift hotel owners’ EBITDA by about 0.1% to 0.5%, according to Morgan Stanley.
- Grahamling expects hotel margins to start benefiting in the second half of 2027, with further gains in 2028.
Notable quotes
“That future is coming into focus and it could reshape the economics associated with the marketing and distribution behind the $640 billion global hotel industry”
“We estimate that every year the lodging industry spends between 22 to5 billion in marketing”
“traditional search engines directed travelers to official hotel websites just 13% of the time. with AI powered searches that jumped to 97%”
“When we told the AI agent that a traveler belonged to a hotel loyalty program, 100% of the resulting links pointed to official hotel websites”
“We estimate that moving just 1% of bookings from third-party platforms to hotel websites could boost hotel owners ebid die by roughly.1% to.5%”
How the episode opens
Welcome to Thoughts on the Market. I'm Steven Grahamling, Morgan Stanley's US gaming, lodging, and leisure analyst. Today, how AI could transform hotel bookings and reshape the economics of the travel industry.
It's Monday, November 2nd at 10:00 a.m. in New York. So, we all love dreaming about and going on vacations, right?
But you know what we don't love as much? scrolling through dozens of hotel listings, comparing prices across websites, contemplating where and how much we can use our rewards or even maximize points, or even wondering if we're getting the best deal for the right experience.
Absolutely. Paris in December is a lovely choice. You'll get Christmas lights, festive window displays, Christmas markets, cozy cafes, and beautiful winter streets.
When would you like to travel? So, imagine the relief of having an AI assistant understand you and your family's preferences, all of your status and loyalty points, aggregated details and reviews of all the hotels you've ever traveled to and you might want to travel to, and all you need to do is evaluate locations. Then, it finds the right hotel and books it for you.
That future is coming into focus and it could reshape the economics associated with the marketing and distribution behind the $640 billion global hotel industry. We estimate that every year the lodging industry spends between 22 to5 billion in marketing. Add roughly $30 billion in fees collected by online travel agencies or OTAAS and we're talking about 55 to85 billion in spending that AI could influence.
Today, when you book through a third party travel website, hotels typically pay commissions of 10 to 20% if it's a branded hotel or 20 to 30% if it's independent. Booking directly through a hotel's website costs the brand closer to only 5%. That difference can have a meaningful impact on the profitability for their owners.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai hotel bookings
- travel distribution economics
- hotel marketing spend
- online travel agency fees
- direct vs third-party booking
Companies and tickers mentioned
- MS
- Morgan Stanley
Watch the episode
Watch “Will AI Start Making Your Hotel Reservations?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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