DMA and Google AI agree on one thing. The OTA is the spread to compress.
A travel-equity analyst opens the 2025-close performance chart on January 2, 2026. Booking Holdings underperformed the S&P 500 by roughly 45 percentage points across the year. The numbers don't decompose into a single cause. Two regulatory-and-technology forces converged on the OTA category in 2025, attacking from opposite directions of the intermediary's margin position, and the analyst's job is to recognize both.
The EU's Digital Markets Act removed price-parity clauses that historically locked hotels into matching-rate distribution agreements with the OTAs. The clauses had been the supply-side anchor of OTA economics: hotels couldn't offer lower direct rates than the OTA was charging, which meant the OTA's distribution position was operationally protected from supply-side disintermediation. DMA struck the clauses through 2024-2025 enforcement; the supply-side lock-in eroded.
Simultaneously, Google AI Mode and the broader AI-Overview-class search capabilities expanded into travel discovery and booking. The demand-side discovery layer that used to flow through OTA-aggregated search results increasingly flows through AI-mediated discovery surfaces that can surface direct-hotel options at parity-or-better economics with the OTA route.
_DMA erodes supply-side lock-in. Google AI erodes demand-side discovery. The OTA is the spread between supply and demand, and both regulatory-and-technology forces are compressing the spread from opposite directions._
That is the part that holds on the 45-percentage-point underperformance.
What makes the spread compression structurally durable is its bidirectionality. A category that loses pricing power on one side (e.g., supply-side commoditization) can sometimes recover by tightening the other side (e.g., demand-side aggregation strategies). A category that loses pricing power on both sides simultaneously has no compensating mechanism. OTAs in 2025-2027 are squeezed from both directions with no internal lever to reverse the squeeze. Investor-class equity multiples are repricing accordingly, and the repricing is not a temporary cyclical adjustment.
What follows from the bidirectional compression is product-market-fit bifurcation. High-frequency, high-value travelers (corporate-travel, business-class frequent-flyers, loyalty-program-engaged travelers) have low switching costs to AI-native booking surfaces and direct-loyalty programs. Their migration is structurally complete by 2027-2028 absent a category-leader OTA reinvention. Infrequent travelers (annual-vacation-class consumers, SME-class business travelers, occasional-bookers) remain price-and-convenience-sensitive and continue to use OTAs as the easiest comparison-and-booking mechanism. SME hotels (boutique properties, regional chains, independent operators) continue to need OTA distribution because they lack direct-marketing scale. The surviving OTA business serves the infrequent-traveler-plus-SME-hotel segment, which is structurally smaller than the legacy market.
What follows for the operator-class playbook is binary: pivot to API-layer infrastructure (the agent's-vendor-not-user's positioning) or accept the smaller-market revenue trajectory. API-layer infrastructure positions the OTA as the booking-completion-rail for AI agents and corporate-travel platforms. The pivot trades direct-consumer revenue for B2B-revenue and capital-allocation discipline against new revenue mix. Operators who execute the pivot are positioned for durable revenue against the AI-mediated-discovery future. Operators who don't are positioned for the smaller infrequent-traveler-plus-SME-hotel market, with revenue trajectory and equity multiples calibrated accordingly.
The same bidirectional-compression dynamic recurs across categories where regulatory action and technology disruption converge on intermediary positions simultaneously. Real-estate brokerage (NAR settlement on commission structures + AI-native house-search platforms). Financial-advisor intermediation (DOL fiduciary rules + AI-native portfolio-management platforms). Insurance brokerage (state-level regulatory tightening + AI-native insurance-quote platforms). Each has the same structural shape: regulatory action erodes one side of the intermediary's economics, technology disruption erodes the other, and the spread compresses bidirectionally. The categories where both forces converge produce the highest-velocity equity-class repricing.
What survives all of this is that 2025's OTA underperformance is one of the cleaner public examples of regulatory-and-technology bidirectional compression on intermediary-class businesses, the spread compression is structurally durable through 2027-2028 at minimum, and the operator-grade strategy is binary: API-layer pivot or accept the smaller-market trajectory. By 2027 the pivot's success will be visible in revenue-mix disclosures. The OTAs that pivoted will trade at recovering multiples; the OTAs that didn't will continue trading at the new compressed multiples.
DMA and Google AI agree on one thing. The OTA is the spread to compress. The agreement is structural and the compression is operationally bidirectional. The part that holds is to recognize the agreement and pivot accordingly. The operator who didn't pivot in 2025 is the operator-tier watching their multiple compress in real time as each new DMA enforcement action and each new AI-booking-capability release lands through 2026-2027.
—TJ