Can Immersive Technologies Damage Luxury Hospitality? How Extended Reality Using Artificial Intelligence Shape Need for Uniqueness

By customizing services and experiences (Bleier et al., 2020; Campbell et al., 2021; Flavián et al., 2019; Hoyer et al., 2020), immersive technologies using Artificial Intelligence (AI) are revolutionizing and reshaping many industries (Acquisti et al., 2020; Shankar, 2018; van Doorn et al., 2017), creating new possibilities for businesses when used together (Harvard Business Review, 2023) and more seamless, comfortable and nonintrusive experience for users (Vorobeva et al., 2022) AI immersive applications in hospitality have shown to be promising (Shin & Jeong, 2022) and becoming a norm to satisfy their key target markets and enrich guest experience (SGEI International, 2020). For instance, Radisson Blu Hotels launched an AI assisted Chatbot Edward enabling guests to have an interactive experience with AI, such as text messages from guests seeking information about maintenance concerns, amenities, directions, and travel advice (Burns, 2016). In addition, China Airlines has used immersive technologies using AI to extend human capacities, enhance safety, and improve performance (Harvard Business Review, 2022). Despite immersive technologies emerging trend in luxury hospitality, recent research shows mixed findings regarding its impact. On the one hand, previous studies show that using AI immersive technologies allows luxury hotels to provide personalized services, thus enhancing the customer experience and perceived competence (Nam et al., 2021; Li et al., 2021; Longoni & Cian, 2020). On the other hand, research suggests that consumers evaluate AI applications negatively in the luxury sector (Nozawa et al., 2022), suggesting that a human mixed reality is more effective (Wien & Peluso, 2021). This paper builds upon the extended reality framework (Rauschnabel et al., 2022) and need for uniqueness (NFU) (Abosag et al., 2020; Snyder & Fromkin, 2012; Ruvio et al., 2008) to examine immersive technology effects on consumers' willingness to accept luxury recommendations. NFU is an essential driver of consumer behavior in the luxury setting (Bian & Forsythe, 2012; Ruvio et al., 2008). Consumers with high needs for uniqueness tend to avoid popular choices or similarities with other consumers (Tian et al., 2001). In the digital age of AI assisted proliferation, prior research suggests that consumers might resist AI recommendations (Longoni et al., 2019). Specifically, AI assisted (vs. human mixed) reality might be less effective in conveying the uniqueness of their offerings. Despite advances in AI capability over the years, it continues to underperform humans in various tasks, such as feeling and interpersonal skills (Huang, Rust, and Maksimovic 2019; Rust and Huang 2021; Vorobeva et al., 2022). Consequently, consumers are averse to relying on AI to perform tasks typically done by humans, especially if they seem subjective in nature (Castelo et al., 2019). Customers tend to prefer human mixed realities when they are concerned about the unique attributes of the products or services (Longoni & Cian, 2020, Wien & Peluso, 2021). These results are especially salient in the context of symbolic consumption due to strong uniqueness motives and their perception that humans are better at satisfying their need for uniqueness (Granulo et al., 2021). In four experimental studies, we tested in which circumstances using AI assisted (vs. human mixed) reality are more effective in providing luxury experiences and when it increases consumers' willingness to accept them. Study 1 shows that AI assisted (vs. human mixed) reality reduce consumers' differentiation motives. Findings further reveal that AI's detrimental effects have downstream effects causing decrease in unique selfbrand connection. Consistent with our theoretical account, consumers' differentiation motives mediate these effects, and, therefore, we focus our theorizing on the need for uniqueness (i.e., differentiation motives). Study 2 shows that highlighting differentiation (vs. assimilation) motives reduces consumers' willingness to accept AI assisted (vs. human mixed) reality. Study 3 further advances prior findings by considering a new stimulus, namely, uniqueness cues. The study indicates that consumers are willing to accept luxury hospitality recommendations provided by AI when uniqueness cues are not salient. However, when the unique differentiation characteristics are salient, it decreases their preferences towards AI assisted (vs. human mixed) reality. By doing so, the current research makes three significant contributions to the literature. First, we bridge the extended reality (Flavián et al., 2019, Rauschnabel et al., 2022) and NFU literatures (Abosag et al., 2020; Snyder & Fromkin, 2012; Ruvio et al., 2008) to explain when immersive technologies can boost or damage luxury hospitality. Second, we add to recent studies on luxury consumption (e.g., Dubois et al., 2021; Kim et al., 201) by showing that differentiation motives are the underlying mechanism of the detrimental effect of AI assisted reality on consumers' willingness to accept luxury recommendations. In contrast, when assimilation motives are salient, AI assisted (vs. human mixed) reality increases acceptance of luxury recommendations. Third, this research contributes to recent studies on AI-human interactions (e.g., Ahn et al., 2022; Belk et al., 2023; Longoni & Cian, 2020b; Wien & Peluso, 2021) to explain how the use of AI assisted reality in the luxury hospitality landscape can result in brand dilution, but only when differentiation motives are salient. Finally, the findings provide strategies for the luxury hospitality sector through the application of immersive technologies. The use of AI assisted (vs. human mixed) reality depends on the characteristics that the service is enhancing (e.g., unique cues of luxury consumption) – i.e., personalized luxury offers signaling differentiation or uniqueness should be delivered through human mixed (vs. AI assisted) reality.