One of Robert Rosenstein’s biggest concerns is that artificial intelligence, like all new tech, will increase the gap between the haves and have-nots.

“We experienced this with search and marketing – the big companies who could afford to spend versus the small who couldn’t. To really take advantage of AI, you need significant engineering capabilities and I don’t know if small companies will be able to afford that,” said the chairman of Agoda.

Rosenstein, who co-founded Agoda in 2005 before selling to Booking Holdings in 2007, said that while yes, smaller companies can be faster and more nimble, the fact is the biggest benefit of AI right now to increase productivity and cut staff plays to the big companies.

“How can companies reorganize themselves to invest in AI? It requires significant reorganization of human capital to hire engineers who can actually take advantage.”

Calling himself a “tried and tested Agoda guy” and even though he’s now in the ranks of the big boys, acting as personal advisor to Glenn Fogel, CEO of Booking Holdings, the American entrepreneur has a soft spot for the small guys, the underdogs.

“Can a small company with five engineers get it done or do they get wiped out in the face of AI? If the big companies can operate customer service at triple the efficiency, and can invest in engineering and marketing, well, I am really concerned.”

So what can small companies do in light of this reality, I asked. “They have to work collectively. Is there a travel product that Google launches that could help smaller companies succeed?” he asked.

Interestingly, this article written by Matt McIIwain in Madrona, opines that Big Tech’s massive investments in AI could be “fuel for the startups that will shape the future.”

“Big Tech’s massive investments in AI-related infrastructure aren’t just sustaining their own growth — these incumbents are paving the way for the next wave of startups delivering disruptive innovation.

“While pundits marvel at and question the wisdom of Microsoft, Google, Amazon, Meta and Apple’s combined $60 billion in second quarter capital expenditures, it is creating unprecedented opportunities for emerging startups. These GenAI-native “Next Tech” startups are now empowered to experiment and innovate in applied AI thanks to Big Tech’s massive commitments.”

McIIwain believes that “Next Tech can build new layers of value capture (abstractions) that work on top of and across existing applications, data sources, models, and infrastructure to create the next truly disruptive products and companies.”

“Money is going to come at a cost, focus is critical”

Rosenstein noted that the other difference between now and when he started Agoda almost 20 years ago was that “back then, the cost of capital was relatively high and investment interest was not that high. There was not a lot of interest in travel. People assumed American travel companies would expand then, but they didn’t. Today Booking Holdings is a $100 billion company, but back then nobody had made any money.”

Nevertheless, Agoda got acquired in 2007 and that acted as a catalyst for more companies to invest in travel and in Asia. Rosenstein, whose earnout period ended in 2011 and who ended up staying until 2018 as CEO, described the years from 2008-2009 onwards as an incredible period “when the cost of capital was zero.”

“You could do whatever you wanted. Everyone wanted to be a superapp. Everyone chased growth.”

Today, he said, “We are back to where we started in 2005. Cost of capital is higher than it was, the ability to fund business is not easy, money is going to come at a cost. The big question for all companies is – how do you operate in this environment?

“The superapp concept, it’s probably not workable. Businesses have to be super careful with their investment dollars – you can’t just go and open a million business lines. You need to shepherd your capital. It’s not going to be easy to build out markets.”

He said that what Agoda did well was “focusing on one or two things, the right things, with the money we had. Building out a consumer conversion model, search key word buying mode. That’s what we did, we didn’t get distracted by other stuff.”

Younger entrepreneurs have not lived through a world where you have to be focused, he said. “They are a bit all over the place. The ones that can concentrate capital and deploy that to the right thing at the right time – those are the CEOs needed for today.”

Startups should think global from day 1, Asia is where the growth is

While Rosenstein now lives in Washington, D.C., he travels frequently to Asia, for which he has a soft spot. It was in Thailand after all that he co-founded Agoda with the vision of building an online travel company based in Asia, for Asian markets, that would rival the online giants in the west.

He believes Asia is where the growth is going to come in the next few years. “I see a lot less growth in the west in general. Some can grow market share where they don’t have a big share, for example trip growing in Europe, but there’s not as much organic growth in the United States.

“Other than new businesses such as tours and activities, Asia is still going to be the place to chase for growth. Startups in the West have to start thinking internationally – in fact, they should think that way from day one. When they design tech, they should think globally – so you don’t have to do a complete redesign two years down the road.”

Of course, the Asian travel market has evolved a lot in the last two decades. During the time when cost of capital was low, online travel companies, local giants, emerged in big markets such as Indonesia, India and China.

“Local players raised money, they operated at losses, they invested deeply, they captured local markets. But can they continue investing and operating at losses? Is that sustainable? Perhaps it is in China where there are huge natural impediments to international companies, but the big, global companies are now investing in Asia. Maybe the advantage has shifted towards global?”

Rosenstein observed, “We are headed for volatile macro times. The sustainability of business is a very important thing.  Everyone can survive in positive macro times. But when things are tough, how do you survive? You have to keep cost structures low enough, and yet execute relentlessly in a fast-changing tech environment.”

*This article originally appeared in Web in Travel.