The loyalty paradox: when AI books the room, who owns the guest relationship?

When the funnel collapses into a conversation

For most of the digital era, hotel shopping followed a pattern so familiar it became doctrine. Guests searched, clicked, filtered, compared, and then checked out. Hotels optimized every step. Revenue managers refined rate fences. Marketers engineered conversion flows. Loyalty teams inserted prompts at precisely the moment a guest hovered between “considering” and “booking.”

Large language models compress that journey. In a conversational interface, the guest does not navigate a funnel. The guest describes intent. The system translates that intent into constraints, ranks options, summarizes reviews, and explains tradeoffs in plain language. The decision feels guided rather than constructed.

Two platform moves are accelerating this shift.

OpenAI has formalized the idea of applications living inside ChatGPT through its Apps SDK, framing chat not just as a place to ask questions but as a place to transact and execute. The company has signaled future monetization pathways and commerce standards tied to this embedded ecosystem.

At the same time, Google is building AI powered trip planning directly into Search, describing a system that can assemble itineraries and “turn your plans into bookings” within its AI Mode workspace.

In both cases, the message is the same. The decision interface is moving upstream. Travel discovery is no longer merely about links and filters. It is about answers and actions.

That matters because whoever controls the answers increasingly controls the shortlist.

Re-intermediating power, not eliminating it

There is a temptation to frame every technological wave as disintermediation. Travel history suggests otherwise. OTAs did not eliminate intermediaries. They re intermediated the market by offering a cleaner interface and aggregating trust.

Agentic booking does something similar, but at a higher level. Even when the final transaction still rides on familiar rails, an OTA checkout, a brand booking engine, a GDS workflow, the AI can own the most influential part of the journey: the framing of the decision. It captures intent, decides what criteria matter, and reduces complexity into a handful of recommended outcomes.

For hotel owners, that shift changes the balance of influence. Inventory still matters. Connectivity still matters. But the power to shape perception and simplify choice moves toward the conversational layer.

The risk is not that OTAs disappear. The risk is that the hotel brand becomes one step further removed from the initial relationship moment.

A fragile equilibrium

Hotels are not entering this phase from a position of dominance. They are entering from a carefully managed balance.

The State of Distribution Report 2025, produced by HEDNA in partnership with NYU and powered by RateGain, illustrates that balance. In its channel mix view, OTAs and “Direct through Digital and Web” each represent 21 percent of bookings, with GDS, voice, walk ins, and group making up the remainder.

This is not a landscape where direct has decisively won. It is a landscape where direct has fought to parity, and parity requires sustained investment.

The same report underscores a less visible constraint. Four in five hotels still spend up to two full workdays each week stitching reports together, and manual processes continue to dominate commercial analytics.

That operational drag matters more in an AI shaped market. Conversational systems reward precision and consistency. An assistant that is asked to recommend a property does not negotiate with inconsistent rate rules or mismatched amenities. It elevates what it can verify and sidelines what it cannot.

The AI era will not reward ambition alone. It will reward commercial discipline.

The Loyalty Paradox

Loyalty programs were engineered for a world in which hotels could reliably intercept the guest at the moment of booking. Member rate prompts, login reminders, points nudges, and elite benefit callouts were all designed to influence the final click.

In an agentic booking flow, that moment becomes compressed or relocated. The guest may never browse the brand site. The guest may never encounter the membership wall. The booking decision may be made inside a conversational environment that emphasizes outcome over affiliation.

This creates what can be called the Loyalty Paradox. The smoother the booking experience becomes, the fewer opportunities brands have to reinforce loyalty at the precise moment of purchase.

At the same time, loyalty has never been more strategically important. Global hotel groups continue to emphasize loyalty scale and direct engagement as defensive moats against intermediaries and emerging AI agents.

The paradox is not that loyalty is weakening. It is that loyalty must evolve beyond the booking prompt.

How loyalty risks being unbundled

In an AI curated marketplace, brand affinity competes with structured criteria. The assistant can weigh location, sentiment, flexibility, and price with mechanical neutrality. It can interpret breakfast inclusion, cancellation windows, and even implied points value as comparable attributes.

If loyalty benefits are vague or inconsistently expressed, they become invisible inside that calculation.

Three structural pressures are emerging:

1. Loyalty prompts disappear from the natural flow when the booking occurs outside the brand environment.
   
2. The assistant becomes the trusted advisor, subtly shifting habit and trust upward from the brand to the interface.
   
3. Points and perks are translated into decision variables rather than emotional bonds.
   

None of these forces eliminate loyalty. They change where it exerts influence.

Portable loyalty

If the booking storefront is no longer guaranteed to be yours, loyalty has to travel with the guest.

Portable loyalty rests on several principles:

• Benefits must be explicit and machine legible, not implied.
• Identity must be attachable even when the reservation originates elsewhere.
• Value must emphasize tangible outcomes, not only abstract rewards.

An AI cannot recommend what it cannot clearly describe. “Breakfast available” does not carry the same weight as “breakfast included.” “Late checkout upon request” does not carry the same clarity as a defined elite benefit.

Clarity strengthens influence.

Identity attachment becomes equally critical. When bookings originate outside the brand ecosystem, the hotel’s opportunity shifts to confirmation flows, pre arrival communication, digital check in, on property recognition, and post stay engagement. These are no longer secondary touchpoints. They are the primary mechanisms through which the relationship is reinforced.

And finally, loyalty must lean into outcomes. Guests booking through conversational systems are optimizing for convenience, confidence, and reduced friction. The loyalty benefits that resonate most strongly in that environment are those that remove hassle and fulfill preferences, not those that promise distant rewards.

What LLM systems actually reward

To compete effectively, operators must understand what agentic systems privilege.

They favor properties that exhibit:

• Consistent, structured amenities and room attributes.
• Clear and comparable rate inclusions and cancellation policies.
• Reliable inventory and pricing updates.
• Strong and recent reputation signals.

Each of these elements is operational rather than aspirational. They are governed by how well revenue management, marketing, distribution, and property operations align around a single version of product truth.

This is where the industry’s reporting burden becomes more than an efficiency issue. When commercial teams are consumed by spreadsheet reconciliation, they lack the bandwidth to refine the underlying data structures that agentic booking will depend upon.

The AI layer does not create product excellence. It amplifies it.

The emerging economics of the interface layer

Online travel platforms have long monetized demand capture through commissions that can range from the mid teens into the twenties, a cost structure that has shaped brand strategy for years.

If conversational interfaces become primary demand gateways, new economic mechanisms are likely to follow. Visibility inside the agent layer may carry a cost, whether through preferred placement, media spend in AI enhanced environments, or commercial arrangements tied to embedded booking capabilities.

OpenAI’s public discussion of monetization pathways and commerce protocols signals that the agent layer will not remain neutral indefinitely.

For hotel owners, the lesson is familiar. If you do not shape the relationship, you may eventually pay to reacquire it.

The practical response

The correct response is not panic, nor is it blind investment in the latest AI product. It is disciplined adaptation.

Operators who want to remain competitive in an agent driven market should focus on several priorities:

• Audit and standardize property content so that amenities, policies, and inclusions are consistent everywhere they appear.
• Simplify rate architecture to make inclusions and flexibility transparent.
• Strengthen post booking identity capture through seamless confirmation and pre arrival workflows.
• Train property teams to deliver recognition and preference fulfillment regardless of booking channel.
• Reduce manual reporting burdens so commercial leaders can focus on product truth rather than spreadsheet assembly.

None of these steps require abandoning direct booking strategy. They require reinforcing it with greater clarity and resilience.

The future is an interface strategy

The hotel industry has spent two decades debating channel mix. The more consequential question now is which layer shapes the relationship.

As AI systems increasingly interpret guest intent and generate shortlists, they begin to influence not only where bookings occur, but how value is framed, how tradeoffs are understood, and how brands are compared. What appears to be a distribution evolution is, in fact, a structural shift in how demand is organized.

This is not a marketing adjustment. It is a reconfiguration of the commercial stack.

Agent mediated booking blurs the lines between revenue management, distribution, marketing, loyalty, and technology. Rate structure affects recommendation logic. Content governance affects visibility. Loyalty design affects how value is weighted in conversational comparisons. Small decisions compound across the guest journey in ways that are no longer linear.

Treating this as a tactical digital initiative would be a mistake. The question is not whether AI will book every room. The question is how much influence the conversational layer will exert over pricing power, loyalty effectiveness, and long term asset performance.

In periods of structural change, the greatest risk is not moving too slowly. It is moving without a coherent framework. Navigating this transition requires clear scenario modeling, disciplined data governance, aligned commercial strategy, and an honest assessment of where the guest relationship is actually formed.

When AI books the room, the competitive battleground shifts upstream. Those who approach that shift deliberately will protect both margin and brand equity. Those who approach it casually may discover that influence has migrated long before the numbers make it obvious.

The interface is changing. The economics will follow. The only question is whether your strategy changes first.