I don't like this at all. This will definitely benefit the big name company websites, while smaller websites will fall back in the dust.
To use their example of "Hotels in Santa Cruz"- let's say you want to search that, and my website ranks for that keyword.
However, as you are typing it, Google will start showing all of the suggestions for "Hotels". This will increase the click rate for that keyword, and my potential customer is now going to hotels.com, which ranks #1 for Hotels. He will never even get to reach Hotels in Santa Cruz.
This is a big blow to long-tail keywords, as Google instantly starts showing the 1 word keywords that only the big companies manage to rank for.