The Paradox of Immersive Artificial Intelligence (AI) in Luxury Hospitality: How Immersive AI Shapes Consumer Differentiation and Luxury Value

Purpose: This paper aims to bridge the extended reality framework and the luxury hospitality literature by providing insights into how immersive technologies using artificial intelligence (AI) can shape luxury value and consumer differentiation. Design/methodology/approach: We conducted three experimental studies comparing immersive AI versus traditional hospitality across luxury contexts (hotels, restaurants, and spas). Study 1 investigates the effect of immersive AI (vs. traditional hospitality) on customers’ behavioral intentions and the need for differentiation using virtual-assisted reality. Study 2 tests the underlying mechanism of the need for differentiation and luxury value in an augmented reality context. Study 3 provides additional support for our proposed underlying mechanism using virtual-assisted reality in luxury hospitality. Findings: The findings reveal that immersive AI (vs. traditional) luxury hospitality reduces customers' behavioral intentions of using such services and perceived luxury value. Moreover, the findings indicate that the intention to use immersive AI (vs. traditional) luxury hospitality services is contingent upon customers' need for differentiation. Originality/value: The findings have important theoretical and managerial implications for immersive technologies in luxury hospitality. They shed light on the dynamics between integrating immersive AI into luxury hospitality and its impact on customers' differentiation motives and perceived luxury value. The findings reveal the detrimental effect of using immersive AI (vs. traditional hospitality) within this context.