Google's Future
Good morning, readers. We've been talking a lot about AI for much of the year, namely what it's impact will be on the travel industry. But what about its impact on the advertising juggernaut known as Google? We asked that question of a few industry insiders and we've got those answer for you today. There's also a look at the holiday travel forecast and on how - and why - Chinese tourists are staying away from New York City. On the itinerary today:
Will AI change Google's business model?
Near-record travel expected for the holidays
Chinese toursists are steering clear of NYC
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AI and the Future of Google
Generative AI is already prompting travel businesses to retool internal operations and release new products. What it does to Google’s vaunted ad business remains to be seen. The search giant – and its Bard AI – will be competing with the offerings like OpenAI’s ChatGPT, as well as tools from Microsoft, Meta, Apple, and other unseen rivals.
Skift asked several travel executives and investors whether they think the tech will change Google’s business model and if it will become an online travel agency. None explicitly said Google would morph into an OTA, but they forecast far-reaching changes to its advertising business and the competitive landscape.
Among the responses we received:
Brad Gerstner, founder and CEO, Altimeter Capital: “Consumers don’t want ads. They want answers and actions. The world’s most elite travel agent, who knows all of their info, past bookings & preferences in their pocket, and that will soon be possible thanks to AI/GPTs. In this era, subscription, ads, agent fees, CPA, are all on the table. Safe to say it will not look like the 10 blue links and ad spam that we get today.”
Steve Hafner: co-founder and CEO, Kayak: “It definitely will [change], because Google has more datapoints than anyone. Simple use case: Google notices that you’ve accepted a business meeting in Berlin in two months on your Google calendar. It knows from your past Gmail travel bookings that you prefer United, fly business, and like to arrive one day early and leave immediately in the p.m. when meetings end. It also knows your past hotel bookings. AI will help create a suggested itinerary, and Google can prompt you to engage with it across all your touchpoints with them (Chrome, Calendar, Gmail, Android, etc.)."
Emil Martinsek, chief marketing officer, GetYourGuide: “At the end of the day, Google will be very good at what they do: taking a query, and helping break that down into results. But that next step, that final step, is always gonna be challenging for them, I think even in a generative AI world.
Johannes Thomas, CEO, Trivago: “While generative AI is a powerful tool, I don’t foresee it drastically altering Google’s core advertising-driven business model. Google rather seems to be focused on enhancing the search and planning experience, instead of the booking funnel.
How Justfly Is Using Generative AI to Reshape the OTA Experience
With generative AI, online travel agencies (OTAs) are gaining a competitive edge by offering personalized customer service and efficient issue resolutions to couple with their extensive range of travel deals and offerings.
115 Million to Travel This Season
The forecast for holiday travel among Americans is out, and it’s one of the highest on record. Around 115.2 million travelers will fly, drive, ride the bus or take the train during the holiday travel season, according to AAA.
The total number of travelers expected in 2023 marks a 2.2% increase from 2022, and is one of AAA’s highest holiday forecasts on record. The actual record was set in 2019, with 115.6 million travelers.
Air travel is expected to exceed pre-pandemic levels, with AAA predicting 7.5 million travelers will take to the skies, surpassing a 2019 record of 7.3 million.
AAA anticipates that 104 million travelers will drive and around 4 million will either ride a bus or train or take a cruise.
Even as the post-pandemic trend of “revenge travel” wanes, travel still remains strong and in some cases, has either caught up to or surpassed pre-pandemic levels.
A Deloitte holiday survey found that approximately 48% of Americans planned to take at least one trip during the holidays. And it found an increasing number of Americans were taking vacations rather than visiting friends or family.
In fact, Deloitte found that around 29% of travelers planned to pay for lodging during a holiday trip, up from 13% in 2021. The trend is primarily driven by Gen Z and millennials, along with those who have higher incomes.
A Chase Travel study based on its bookings data found the most popular holiday destinations this year were in South America and Asia, along with beach destinations in Mexico and the Caribbean.
Chinese Tourists Don't Love NY
Chinese tourists won’t be coming back to New York City at their pre-pandemic levels next year. Affordability and limited flights are two issues holding back the rebound, say travel executives.
Airfares have been too expensive for Chinese tourists. “Just this past year, we were talking about economy fares of more than $3,500 depending on time of year,” said Peter van Berkel, chairman of the International Inbound Travel Association and president of Travalco, a tour operator.
Flights between the U.S. and China are nowhere near their pre-pandemic numbers. There were 120 nonstop flights between the countries during the week of December 11. The number will reach 126 for the second week of January, down from 674 for the same period in 2019, according to Cirium Diio.
Chinese tourism has been slow to recover since the pandemic. The country was late lifting its Covid-era travel restrictions. The government has also been encouraging domestic over international travel, said van Berkel.
“They are running almost a year and a half behind the other markets,” he said. “Things will definitely improve. It’s not going to be a switch.”
Some New York executives are optimistic about Chinese tourism next year. “I’m very bullish on China,” said Vijay Dandapani, CEO and president of the Hotel Association of New York City. “China’s going to open up.”
Before the pandemic, China was one of New York City’s top tourist segments in terms of spend, NYC Tourism + Conventions CEO and President Fred Dixon told Skift in July. The city expects to receive over 380,000 Chinese tourists this year.
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Skift Travel 200: Top Movers
On a day that saw many hotel operators in the green, Hyatt led the way with a 4.1% gain. Marriott rose 3.4% and Hilton followed closely behind, with a 3.3% gain.
Source: The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number. Go to the Skift Travel 200. Stock data as of market close.