Discussions about artificial intelligence (AI) among industry stakeholders have been rampant, including its potential to disrupt the sector and whether there is more hype to AI than reality.
But with constant evolution and innovation, it begs the question: Are we in an AI bubble? And will it burst?
While onstage at Skift Global Forum on Tuesday night, Glenn Fogel, CEO of Booking Holdings, said that what’s happening reminds him of the height of the dot-com explosion.
“It seems almost the same thing, this Cambrian explosion of new things you can do,” Fogel said.
When asked about the resultant dot-com crash and whether the world is now living in an AI bubble under similar conditions, Fogel pointed to when he joined Priceline, now part of Booking Holdings, in February 2000—just before the NASDAQ’s March peak.
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Fogel said that when the company went public in the spring of 1999, it had an established market capitalization of more than $30 billion. It dropped to about $15 billion, and by the end of 2000, it was “down to a couple hundred million dollars.”
“Even my mother thought we'd gone bankrupt,” he said. But eventually, things turned around.
Right now, however, Fogel sees a similar situation.
“I believe that, yes, there are going to be a lot of companies that are absolutely not going to make it. The valuations are crazy. It's not going to work, etc.,” he said.
Other industry stakeholders agree.
“The similarities are clear: sky-high valuations, breathless claims and startups that can’t deliver on their promises,” Janette Roush, senior vice president of innovation and chief AI officer at Brand USA, told PhocusWire.
Gaurav Sharma, founder and CEO of Mosaic Hospitality, also told PhocusWire that he also sees a bubble in AI valuations.
“Too much money is chasing too many thin startups, while AGI models still operate in silos,” Sharma said. “In hospitality, adoption is fragmented and still at an early stage, moving only as fast as management intelligence allows.”
Roush expects a “correction” is likely to happen at some point.
The AI bubble is not the same as the dot-com bubble
Industry members said the current situation differs from the dot-com bubble, regardless of how it may appear on a surface level.
AI, Sharma said, is already creating real utility. And according to Roush, the difference lies in adoption and scale of AI.
“The internet in 2000 required people to change their behavior,” she said. “AI is creeping into the services and products we use every day, and that’s already changing our behavior.”
She referenced Google and how its search queries are getting longer as humans lean into natural language and provide context to get personalized results.
“We all had to be trained to search for ‘10 restaurants near me,’ but that never made much sense,” she said. “Humans don’t speak like that. It’s natural to provide the context needed to get a personalized result.”
Even though the situation is not the same, risk still exists. Sharma sees danger in misallocation.
But there are things travel companies can do to better position themselves.
“Leaders need to focus on four things: discovery shifting to agents and aggregation, integrating commercial data across revenue, sales, marketing and digital, protecting brand voice when algorithms decide who finds us and keeping ROI discipline tied to NOI and asset value,” Sharma said.
That’s what he believes will separate the winners from the losers in the AI race.
Even if there is a crash, AI can still succeed
Even if there is a bubble, that doesn’t mean overarching success won’t result from a pop, according to Fogel, whose Booking Holdings has taken a vested interest in AI’s advancement through product updates and partnerships with AI incumbents like OpenAI.
“You can have bubbles in the valuations, but if it's a good company, it can produce something that is great,” he said, later adding, “What's being built is technology that will absolutely, I'm certain … change every part of society.”
Parts of AI will crash, and that reset is healthy.
Gaurav Sharma, Mosaic Hospitality
Roush agreed, sharing her own bubble experience.
“In 2000, the ticketing company I worked for was acquired by Broadway.com, so I had a front-row seat to the dot-com bubble and watched companies like Pets.com crash,” Roush said. “The valuation of that company made no sense in comparison to the potential profitability of that service. But a bubble didn't mean the underlying technology is a fad. Pets.com was ridiculous; e-commerce wasn’t.”
AI, Roush said, is going to be the foundation of the next era of technology and business.
And Sharma actually looks at a potential burst as a good thing.
“Parts of AI will crash, and that reset is healthy,” he said. “The hype will fade, but the foundation will strengthen. In hospitality, the risk is not collapse, it is irrelevance if we fail to adapt.”