Saturday, July 13, 2024
CEOWORLD magazine - Latest - CEO Agenda - Will you be an AI outsider “company”?

CEO Agenda

Will you be an AI outsider “company”?

artificial intelligence

As AI develops it will be an essential tool in all organizationsAs ACI (artificial conscious intelligence) and AGI (artificial general intelligence) develop (predicted to be ubiquitous by 2030), our society and business landscape will transform radically.

AGI is a type of AI that can perform as well or better than humans on a wide range of cognitive tasks, as opposed to narrow AI which is designed for specific tasks. In his book The Coming Wave, Mustafa Suleyman, warns that unless we contain AI in general (and AGI in particular) a very small number of companies (let’s call them the Big 8) Google, OpenAI , Microsoft, Facebook, Amazon, IBM, Tesla and Chinese tech giant Baidu, will totally dominate the field.  Most of these companies hold tens of billions of dollars in cash and cash equivalents giving them huge capacity to take an even stronger hold over the global market.  

“So what?” you might ask.  “So, what if a few very powerful, very wealthy companies have a “stranglehold” over the most powerful technology mankind has ever seen?”  

To answer this, let’s have a look at what has happened with OTAs (on-line travel agencies).  I’m old enough to remember the days when, if I wanted to travel the globe, I would go to a travel agent who specialized in high end travel.  They would book my airfares and accommodation, take a fee for their services, and provide me with a wallet containing all the information, visas. etc. I needed for my trip.  Now, I go online to or Expedia or Trivago and in a matter of minutes can book my entire trip myself, having compared a range of options for every leg of the journey and every overnight stayWith an AI VA (virtual assistant), I can do this even faster.  

When OTAs first appeared, they were seen as a boon, a great help, in terms of attracting more bookings to hotels and resorts around the world.  Back then (early 2000s) OTAs charged a fee of around 10%.  Accommodation providers reckoned that as the OTAs were bringing in new business 10% of something was way better than 100% of nothing.  They signed up en masse.  In 2023 alone had a revenue based on merchant, agency, advertising, and other types of roughly 21.4 billion U.S. dollars.  

 Now accommodation providers are beholden to OTAs.  Accommodation providers are prohibited from advertising their product at a lower fee or a discount on the OTA price. This has put a huge squeeze on profits of accommodation providers who are then restricted in funds available for non-booking expenses such as food, room upgrades and staff.  

This creates a huge funnel taking money out of local economies and feeding it through to a limited number of giant OTAs – mostly situated in the US. 

The real cost to a hotel of using Expedia and can vary depending on several factors such as the commission rates negotiated with these platforms, the volume of bookings generated through them, additional fees for premium placement or advertising, and any contractual agreements in place. 

Typically, OTAs charge hotels a commission for each booking made through their platform.  Today, that commission is as high as 25% or even more. This commission is deducted from the hotel’s revenue for each reservation made through the OTA. Additionally, hotels may incur other costs such as fees for participating in promotional programs or for using additional services provided by the OTAs. 

Some hotels are opting to diversify their distribution channels or focus on direct bookings to reduce reliance on OTAs and mitigate associated costs.  However, if local providers advertise or are seen to reduce accommodation costs to below that offered by the OTAs – those providers are deplatformed.  Thus, removing them from the huge pool of potential guests offered by the OTAs. 

Some hotel chains have chosen to reduce their reliance on OTAs or even opt not to use them altogether. One notable example is Hilton Worldwide, which has been implementing strategies to encourage more direct bookings through its own website and loyalty program. Marriott International has also made efforts to promote direct bookings and reduce dependence on OTAs.  However, to flourish outside the OTA net is challenging even for the big players.  For smaller providers it can be a business killer. 

This is what industry kingpins like Mustafa Suleyman (co-founder of Deep Mind – the inventor of AlphaGoh – the first AI to beat the world’s Goh champion) are predicting will (without containment) happen to AI and AGI.  We will all need it.  Lulled in by accessible pricing we will become dependent on powerful AI and AGI tools which will be developed by the Big 8 and licensed to a number (maybe 20) smaller IT giants to be distributed around the globe.  Then the prices will rise, and the conditions of use will be set, and we will all be encumbered by a very small number of very powerful players.  If we don’t play the game by their rules we will be cut off and/or deplatformed from AI and AGI services and service providers. This will create many AI outsider companies who will need to be very creative in how they operate outside the net of the Big 8 and their key licensees. 

Are you ready? 

Written by Margot Cairnes.
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CEOWORLD magazine - Latest - CEO Agenda - Will you be an AI outsider “company”?
Margot Cairnes
Margot Cairnes has been a trusted mentor to CEOs and Boards worldwide, leading multi-billion dollar strategic change programs in collaboration with clients. A World Economic Forum participant and mentor, Margot has written 6 books on leadership in times of rapid and disruptive change. For many years, she founded and managed Zaffyre Pty Ltd, Australia's largest and longest-operating strategic change consultancy. She now resides in Byron Bay and mentors clients over Zoom.

Margot Cairnes is an Executive Council member at the CEOWORLD magazine. You can follow her on LinkedIn, for more information, visit the author’s website CLICK HERE.