Google’s Latest AI Push Hits Travel Stocks. Why They Can Rebound.

Expedia and Booking have loyalty programs, with the potential to keep users engaged with their platforms.  (Tiffany Hagler-Geard/Bloomberg)

Key Points

• Google said users could build itineraries with the AI tool Canvas, which integrates search results and Google Maps. Shares of Booking and Expedia fell.
• Investors are concerned Google’s new AI tools could divert business from online travel agencies.
• Online travel agencies like Expedia and Booking already use AI, have loyalty programs, and cater to casual leisure travelers who may prefer established booking methods.

Shares of Expedia and Booking Holdings , owner of Priceline, are sagging following news that Alphabet’s Google is unveiling artificial intelligence tools aimed at travel. Yet it may be little more than a bump in the road for these companies.

On Monday, Google said on its blog, The Keyword, that users could build itineraries with the AI tool Canvas, which integrates search results and Google Maps. It also said it was expanding its AI-powered airfare program, Flight Deals, worldwide. The company said that users would soon be able to complete hotel and airfare bookings in AI mode.

The news sent shares of Booking and Expedia down by percentages in the mid-single digits on Monday afternoon. Investors are concerned that if consumers can both research and reserve via Google, it will mean less business for the online travel agencies.

That could be an overreaction. Some business may be siphoned away from the online agencies, but it is worth noting that they too already incorporate AI in their platforms. Their systems allow consumers to ask questions, compare prices, and build itineraries.

Expedia and Booking both appeal to more casual leisure travelers who don’t book directly with hotels and airlines, which often won’t honor status or award points for reservations made via third-party sites. Those customers, who tend to travel less often, may be less likely to try new AI features or switch from methods that have worked in the past if they take relatively simple, infrequent trips.

Some may worry that unlike a travel company, Google won’t have customer service staff on hand if anything goes wrong with a reservation. And AI doesn’t always get it right.

Also working in the online travel agents’ favor is that Expedia and Booking have their own loyalty programs, with the potential to keep users engaged with their platforms.

Both companies have thrived even as Google has expanded its suite of travel services, and consumer habits can be hard to break. While Google’s news is something to watch, online travel stocks are still going places.

Write to Teresa Rivas at teresa.rivas@barrons.com