As the curtain closes on 2025, the global travel sector has emerged from its post-pandemic "revenge travel" phase into a new era of stabilized growth and intense technological competition. However, not all industry titans are entering 2026 on equal footing. While the broader market remained resilient, Booking Holdings Inc. (NASDAQ: BKNG) found itself navigating a turbulent year-end, significantly underperforming its closest rivals as regulatory pressures in Europe and a sudden leap in artificial intelligence capabilities from tech giants began to bite.

The performance gap is stark. While the S&P 500 enjoyed a robust year, Booking Holdings delivered a modest 10.3% return in 2025, a figure that pales in comparison to the 55.6% surge seen by Expedia Group, Inc. (NASDAQ: EXPE). This divergence marks a pivotal shift in the online travel agency (OTA) hierarchy, raising questions about whether the long-standing dominance of the Amsterdam-based giant is being structurally challenged by a combination of legislative mandates and the "agentic" AI revolution.

A Year of Friction: From Gatekeeper Status to AI Disintermediation

The primary catalyst for Booking’s late-year sluggishness can be traced back to the European Union’s Digital Markets Act (DMA). Having been designated a "gatekeeper" in May 2024, Booking.com faced a strict November 2024 deadline to comply with rules designed to foster competition. By the second half of 2025, the financial consequences became undeniable. The forced removal of "price parity" clauses—which previously prevented hotels from offering lower rates on their own websites than on Booking’s platform—led to a significant shift in consumer behavior. European hoteliers, finally free to undercut the OTA, successfully diverted a larger share of bookings to their direct channels, eroding Booking's "best price" reputation.

Compounding these regulatory woes was a technological earthquake in November 2025. Google, owned by Alphabet Inc. (NASDAQ: GOOGL), launched a major update to its AI Search/Travel Mode, introducing "agentic" booking capabilities. This tool allows travelers to plan entire multi-city itineraries and execute bookings directly within the Google interface using autonomous AI agents. For Booking Holdings, this represents a "double-edged sword": not only does it threaten to disintermediate the OTA by keeping users within Google’s ecosystem, but it has also forced Booking to increase its marketing spend on sponsored links to maintain visibility, as organic "click-outs" from traditional search results plummeted.

The timeline of 2025 was further marred by a cooling of the U.S. consumer market. While luxury travel remained a bright spot, Booking’s management noted a "cautious" trend among budget-conscious travelers in Q3 and Q4. This demographic, hit by persistent if cooling inflation, began opting for shorter stays and lower-tier accommodations, a trend that hit Booking’s commission-heavy model harder than its peers who have more diversified revenue streams.

The Winners and Losers of the 2025 Travel Pivot

In the high-stakes game of global travel, Expedia Group, Inc. (NASDAQ: EXPE) emerged as the undisputed winner of 2025. The company’s successful rollout of its "One Key" unified rewards program—which links Expedia, Hotels.com, and Vrbo—finally gained the critical mass needed to challenge Booking's scale. By the end of the year, Expedia reported a 10% growth in room nights, outpacing Booking’s 8.2%. Investors rewarded this efficiency, sending Expedia’s stock to record highs as its B2B segment also saw explosive growth.

Another significant beneficiary has been Trip.com Group Limited (NASDAQ: TCOM). Capitalizing on the continued recovery of outbound Chinese tourism and a dominant position in the high-growth Asia-Pacific market, Trip.com reported consistent 16% revenue growth through 2025. Its ability to capture the "Golden Week" and summer travel surges in Asia allowed it to trade at a premium relative to its historical averages, even as Western-centric platforms struggled with market saturation.

Conversely, Airbnb, Inc. (NASDAQ: ABNB) joined Booking in the laggard category, posting a roughly 9% return for the year. While Airbnb remains the leader in alternative accommodations, it faced its own set of regulatory hurdles as major cities like London and Paris followed New York's lead in tightening short-term rental restrictions. Furthermore, as travelers in late 2025 began prioritizing "predictability" and "value" amid economic uncertainty, traditional hotels—the bread and butter of Expedia and Booking—regained some of the market share they had previously lost to private rentals.

Broader Trends: The Rise of the AI-First Traveler

The underperformance of Booking Holdings is more than just a company-specific story; it is a bellwether for the broader evolution of the $1.6 trillion travel industry. The shift toward "agentic" AI is the most significant trend since the move from offline to online booking two decades ago. By 2026, industry analysts expect over 54% of travelers to use AI agents for trip planning. This shift places a premium on data and direct integration, favoring platforms that can offer a seamless "one-click" experience over those that act as simple directories.

Furthermore, the DMA’s impact on Booking suggests a future where the "gatekeeper" advantage is permanently diminished. Regulators are increasingly focused on data portability, allowing hotels to own the customer relationship more effectively. This is forcing OTAs to pivot from being mere transaction platforms to becoming "lifestyle travel partners." This trend is evident in the rise of secondary destinations; Agoda, a subsidiary of Booking Holdings, noted that searches for non-hub cities in Asia are growing 15% faster than for major capitals, as travelers seek "authentic" experiences to escape the over-tourism of primary hubs.

Historically, the travel sector has been prone to such disruptions—from the rise of low-cost carriers to the birth of the sharing economy. However, the current convergence of regulatory intervention and AI-driven disintermediation is unique in its potential to permanently compress the high margins that OTAs have enjoyed for years.

Looking Ahead: The 2026 FIFA World Cup and the Asia Surge

As we look into 2026, the outlook for the travel sector is one of "stabilized optimism." The International Air Transport Association (IATA) projects air passenger traffic to grow by 4.9% this year. The standout catalyst for 2026 will undoubtedly be the FIFA World Cup, hosted across the United States, Canada, and Mexico. This mega-event is expected to drive a 3.7% increase in inbound international visits to North America, providing a much-needed boost to the domestic market and potentially acting as a tailwind for companies like Expedia and Booking.

For Booking Holdings to regain its footing in 2026, a strategic pivot is required. The company must accelerate its own AI integrations to compete with Google and find ways to add value beyond the price-comparison model that the DMA has weakened. Investors should watch for a potential "rebound" play if Booking can successfully leverage its massive cash reserves for acquisitions in the high-growth Asia-Pacific region, where travel demand is expected to lead the world with a 7.3% growth rate this year.

The Investor’s Takeaway: A Market in Transition

The narrative of 2025 was one of divergence. Booking Holdings, once the untouchable king of the OTA space, has been humbled by a "perfect storm" of regulatory mandates and technological shifts. Meanwhile, Expedia has proven that internal restructuring and unified loyalty programs can pay dividends, and Trip.com has shown the power of regional dominance in a recovering Asia.

Moving into 2026, the market will likely reward companies that can master the "AI-agent" interface while navigating a more complex regulatory environment in the West. For investors, the key metrics to watch will be marketing efficiency and direct-booking rates. If Booking can stabilize its margins in the face of Google’s AI encroachment and the loss of price parity, its current valuation may represent a long-term opportunity. However, the days of easy growth for the online travel giants are over; the next chapter of the travel industry will be defined by who can best serve the "intelligent traveler" in a world where the platform is no longer the gatekeeper.

This content is intended for informational purposes only and is not financial advice.