Airports are maxed out because travelers are finally getting out after a two-year hiatus. During the lengthy layover in the global travel market, a new competitor -- Alphabet's (GOOG -2.08%) (GOOGL -2.12%) Google Travel -- was born. The growing Google Travel service has advantages over Expedia (EXPE 0.54%) and other online travel platforms. As travelers return to business as usual, Expedia may not. Here's why.

New sheriff in town

Online-travel platforms, like Expedia and its subsidiaries -- Hotels.com, Vrbo, Travelocity, Hotwire, Orbitz, and trivago -- grew their top lines rapidly for over a decade. For instance, Expedia generated just over $3 billion in revenue in 2010. Through acquisitions and organic growth from travelers embracing online platforms, Expedia grew its revenue at an impressive 16.7% annual rate to $12 billion in 2019 before the coronavirus put the brakes on travel altogether.

Most online-travel platforms are commodity-like in that hotels, airlines, and car-rental companies list their services on the platforms for a fee. In return, Expedia and other platforms generate traffic to their websites and sell services that otherwise would not have been sold.

Person searching for flights on a personal computer.

Image source: Getty Images.

The system was symbiotic until Google stepped in. Last year, Google parent Alphabet allowed hotels and flights to be listed on Google Travel for free, effectively bypassing online travel platforms. The move came at a fairly innocuous time because the travel industry was still licking its wounds from the coronavirus. However, hotel operators and airlines were trying to cut costs during the slowdown. The free Google Travel platform may have been just what the doctor ordered.

Expedia can also list its services on Google Travel. Though in 2022, the percentage of times Expedia showed up on Google Travel with the cheapest hotel dropped to a fraction of its 2020 percentage. At the same time, listings from hotels' official sites markedly gained traction on Google Travel. In response to the proliferation of Google Travel as a competitor, Expedia CEO Peter Kern remarked, "[W]e sort of accept their game as it is laid out to us and have to play it."

Now what?

A potential changing of the guard couldn't have come at a worse time. The stock is down over 50% this year as airlines struggle with staff shortages holding back pent-up travel demand. Travel spending is expected to reach $1.1 trillion in 2022, just 10% shy of 2019. Expedia investors hoping for a breath of fresh air if shortages are filled shouldn't hold their breath.

Google Travel won't likely bring Expedia to its knees, but it could sting. Google dominates internet searches. So Expedia may need to up its advertising budget and get creative if it's going to get travelers to go directly to its websites instead of to Google.

Additional costs to compete with Google Travel may cut into Expedia's already thin margin. Excluding 2020 and 2021, the company's net margin has averaged 5.6% since 2012. If the new competition or customers bypassing Expedia and its other platforms push it to lower net margins, the stock may not return to its past highs. Worse, if Expedia experiences negative earnings, it will be tough for investors to find value in the stock at all.

Global inflation and recession fears seem to have gripped stocks this year creating many great opportunities for savvy long-term investors. Expedia may not be one of them.