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Abstract

This case study describes the opportunities and challenges of applying artificial intelligence applications to luxury hotel services. More specifically, this study examines the dilemma that LOTTE HOTEL SEOUL faced when adopting robot-based applications to enhance guest services. The dilemma involves employee morale, algorithmic bias, and perception of luxury service quality. Applying the Modified Technology Acceptance Model, it illustrates the impact of smart technologies on lodging operations in the post-pandemic era. Strategies and solutions were also discussed.

Keywords

luxury hotel services modified technology acceptance model post-pandemic era service robots smart hospitality

Introduction

It’s often the case that new challenges provide new opportunities to embrace change. Due largely to the challenges that accompanied the COVID-19 pandemic, the adoption of innovative technologies has accelerated, presenting a new digital horizon for the hospitality and tourism and lodging industry (Higueros, 2023). Among the challenges this industry faced was the need to quickly develop innovative strategies to provide both safety and service to customers in response to pandemic related health concerns (Chua et al., 2021).

Among the innovative strategies explored was the use of robot-based applications. The potential of robotic applications was quickly recognized as an innovative technology that could greatly impact hotel management operations in general, and related services in particular. What wasn’t immediately apparent during the pandemic was the uncertainty of adopting a new and untested technology. Would the shift to robotic solutions be a short-lived necessity, or would it be seen as a negative development by prospective hospitality customers? Shifts in customer preferences and changes in technology are turning the business upside down (Tuomi et al., 2021). It now seems the shift was the correct strategy. As the shift to remote or non-face-to-face businesses accelerates around the world, the hospitality industry is developing strategies to transform into smart hospitality. Central to this transformation is embracing technological advancement, especially the integration of Artificial Intelligence (AI) based service robots (Bae & Chang, 2021).

In particular, the hospitality industry is embracing innovative technologies to increase the efficiency of services provided to customers needed to meet demand during the pandemic, and to meet increased post-pandemic era demand. The integration of AI-based service robots represents a convergence of the traditional hospitality industry’s state-of-the-art service delivery method, heralding a new era of smart hospitality (Chung et al., 2017; Koo et al., 2015; Tuomi et al., 2021). Essentially, integrating service robots means more than the automation of physically iterative tasks. The traditional constraints of time and effort involved in delivering food to the table or managing room service delivery no longer create bottlenecks in the workflow productivity of hospitality (Higueros, 2023). Customers increasingly want unique and memorable experiences, and the integration of cutting-edge technology perfectly meets these expectations (McCartney & McCartney, 2020).

Not only does the service robot meet technology-savvy demographic characteristics, but it also serves as a symbol of the hotel’s commitment to overcoming the complexity of the post-pandemic environment, raising hygiene standards, and strengthening the hotel’s brand image (Higueros, 2023). Among the luxury hospitality hotels that are strategically deploying AI service robots to achieve these objectives is LOTTE HOTEL SEOUL (Microsoft, 2023). With advances in AI, data-driven systems, and service robots, hotel managers are looking for more effective methods that provide rapid innovation integration and meaningful data collection and utilization (Reis et al., 2020). To date, these innovations appear to be improving operations and services, allowing employees to work more effectively while meeting customer efficiency expectations.

In addition, the utilization of service robots also plays a pivotal role in raising safety and hygiene standards, a key global health concern arising from the pandemic. Service robots help to provide safe delivery to both customers and employees by reducing direct human contact in certain processes—reducing potential for contamination and contributing to the overall health and well-being of everyone on the hotel premises (Higueros, 2023). By actively accepting AI-based service robots, LOTTE HOTEL SEOUL is determined to innovate the hospitality industry and provide new services to communicate with customers in the hospitality industry in the era of digital transformation and set new standards (Lotte Data Communication, 2024).

This case study intends to provide valuable insights into the trajectory of future smart hospitality through critical analysis and strategic exploration of opportunities and challenges related to integrating AI technology into the service industry. Through this study, we advocate the responsible and innovative use of technology in shaping the future of the smart hospitality industry.

Background

Faced with challenges due to the pandemic, high-end hospitality companies such as LOTTE HOTELS & RESORTS have been at the forefront of innovation by leveraging innovative technologies to improve service quality, cater to the needs of various customers, meet customer expectations, overcome difficulties caused by the pandemic, and overcome the challenges caused by the pandemic. Luxury hotels, including the LOTTE HOTEL SEOUL, recognize innovation as a means to not only improve the experience and satisfaction of their customers but also to streamline operations and increase efficiency (Ivanov et al., 2017; Tuomi et al., 2021).

Lotte Hotel Seoul: Luxury Lodging Experiences in South Korea

LOTTE HOTELS & RESORTS is a Korean luxury hotel chain operated by LOTTE HOTELS Inc., the hospitality affiliate of the LOTTE Corporation, the largest Hotel Corporation in South Korea. Founded in May 1973, the company opened luxury chain hotels in the South Korean cities of Jamsil, Busan, Jeju, and Ulsan. It is now a global hotel that extends beyond Asia to the world and intends to become a brand that impresses customers with elegant services and facilities everywhere in the world. Among its 19 properties, LOTTE HOTEL SEOUL was first launched in 1979. It is South Korea’s top luxury hotel with 1,015 rooms located in Sogong-dong District, Seoul. It boasts the best location for tourism in Seoul due to its accessibility to the city’s main tourist attractions (Microsoft, 2023).

LOTTE HOTEL SEOUL is a five-star hotel in Seoul known for offering luxurious accommodation options. Designed by four global design companies, it is considered to be Korea’s leading hotel. In addition to hosting the largest number of international events and cultural festivals, it is the preferred hotel of VIPs and visiting foreign dignitaries and world leaders. Customers can experience the ultimate comfort and unforgettable luxury in the center of Seoul. Its Executive Tower features an impressive 278 rooms and suites, provides a luxurious destination for both business and leisure travelers, and offers unmatched elegance and sophistication. In addition, it offers rooms with 10 food and beverage options and a luxurious interior. Guests also have access to a fitness center, spa, and indoor swimming pool. It also is the home of the La Seine restaurant which offers an international buffet and a live kitchen, as well as Pierre Gagnaire à Séoul which offer French cusine, and the upscale Korean fusion restaurant Mugunghwa. In addition to these restarurants, the Peninsula Lounge & Bar offers a variety of drinks and desserts and afternoon tea. LOTTE HOTEL SEOUL offers the best sophistication and luxury with meticulous and exclusive VIP service. Guests can enjoy unlimited options from high-end venues for family gatherings, luxurious weddings, and large business events to tempting international cuisine (Von Klemperer, 2018).

LOTTE HOTEL SEOUL includes a “ladies only” floor that ensures the safety and comfort of solo female travelers. Located on the “ladies only” floor, the Sulwhasoo Spa offers a blend of traditional Eastern herbal medicine with modern technology, and specializes in pampering treatments using natural Oriental ingredients. The spa is one of the most highly regarded in East Asia. Also, it has the city’s first salt room, where guests can relax. Fashionistas and shopaholics can enjoy duty-free shopping for many luxury brands such as Chloé, Louis Vuitton, and Hermès.

Although many hotels in the hospitality industry are re-establishing customer-service provider relationships by introducing these technologies (Chua et al., 2021), LOTTE HOTEL SEOUL has established itself as the leader in the South Korean luxury hotel industry by applying digital innovation to the standardized service process. By leveraging strategic partnerships they are also becoming known as one of the most technology savy chain hotels around the world.

Robot-based Application in LOTTE HOTEL SEOUL

Known for its excellent service and high-end accommodations, LOTTE HOTEL SEOUL is leading the digital transformation of the hospitality industry (Von Klemperer, 2018). The hotel has upgraded its non-face-to-face technology service by incorporating state-of-the-art technology. The hotel’s robots provide many contactless services such as guest check-in, room service, laundry, and transportation Guests can interact with an AI-based smart concierge that provides information on popular tourist attractions and restaurants in Seoul. The hotel lobby hosts a service delivery robot that welcomes guests with amenities and adds convenience and fun (TTG Asia, 2021). The LOTTE HOTE SEOUL robot-based applications also provide delivery of personal amenities kits to rooms. Each room is equipped with an artificial intelligence speaker called “Giga Genie,” which allows users to request concierge services, control heating, and various online streaming services (Schlothauer & Wilhaus, 2016; Von Klemperer, 2018).

These AI-based systems not only meet guest needs, but they also benefit the hotel as well. Key metrics such as customer satisfaction scores, operational cost savings, and reduced service delivery times support these claims (Lotte Profile, 2023). The LOTTE HOTEL SEOUL recently launched an automated work environment using Microsoft’s power platform. The power platform is Microsoft’s low-code solution to create apps and automate organizational processes without professional application developers (Microsoft, 2023). It allows employees to automate tasks that are needed through training and leave repetitive tasks to AI-powered robots.

The Benefits

In a world where customer expectations are constantly changing, adopting service robots is a strategic differentiator (Higueros, 2023). The Ministry of Trade, Industry, and Energy of South Korea announced a master plan to invest $2.26 billion in the robot sector by 2030, to supply 1 million robots to the domestic industry.

The South Korean robot market is expected to grow at an annual rate of 7.37 percent from 2024 to 2028. About 50 regulations will be lifted, allowing 15,000 professionals to promote and support the robot industry. South Korea aims to deploy 1 million robots across agriculture, logistics, defense, and medical care sectors. The plan establishes robot-friendly infrastructure and establishes ethical guidelines for robot development and utilization to increase the size of the local robot industry to 20 trillion won (approximately USD 15.38 billion) by 2030 (Joseph, 2024). The plan aims to locally procure 80% of major robot parts by 2030, compared to the current estimate of 44% (Joseph, 2024).

LOTTE HOTEL SEOUL recently created an automated work environment using Microsoft’s power platform. The power platform is Microsoft’s low-code solution that supports everyone to create apps and automate organizational processes without professional developers. It allows employees to automate tasks that are needed through training and leave repetitive tasks to AI-powered robots (Microsoft, 2023).

Using the power platform, LOTTE HOTEL SEOUL was able to build an automated reservation system that automatically stores and manages reservation information from external platforms. Prior to deploying the automated reservation system, employees had to manually capture and enter data into the company’s reservation system. This helped save about 10,000 hours a year at 17 hotels nationwide and reduced errors that might have occurred with the previous manual entry system. In addition, it minimized the cost of building and operating an automated work environment (Schlothauer & Wilhaus, 2016).

LOTTE HOTEL SEOUL is also investing in employee training and helping to create Robotic Process Automation (RPA) models for tasks using the power platform. LOTTE HOTEL SEOUL management believes employees with practical and hands-on experience will be able to identify and implement significant improvements in work efficiency and productivity (Schlothauer & Wilhaus, 2016). A phased approach is targeting employees’ customer service and internal operations will be selected for initial app and web page development (Microsoft, 2023). It plans to expand the use of the power platform by encouraging employees with RPA council activities such as contests and rewards. Using this approach is expected to minimize problems typically induced by humans engaged in app development and roll-out.

Providing continuous innovation and excellence using AI and related technologies is becoming the new standard for high-end hospitality in the digital age (Von Klemperer, 2018). This case study aims to explore the factors that influenced the introduction of service robots following the pandemic from the perspective of LOTTE HOTEL SEOUL’s service providers.

Dilemma

Hann (2023) argued that AI will continue to drive innovations in various industries, and predicted an annual growth rate of over 37% between 2023 and 2030. This rapid growth highlights the increasing influence and importance of AI technologies in the future. Innovative AI solutions offer numerous potential benefits, including improved operational efficiency and cost savings (Ivanov et al., 2017; Tuomi et al., 2021). Despite the benefits of AI adaptation to lodging operations, adopting these technologies presented the LOTTE HOTEL SEOUL management team with several complex dilemmas.

Employees Morale: Sense of Crisis

LOTTE HOTEL SEOUL implemented robot-based AI applications to enhance services. This objective seemed like an attractive and innovative way to not only solve reduced pandemic era demand, but would also improve productivity and enhance brand image. However, the solution was not without costs. New technology and systems require training for employees to operate them effectively. AI and robotic systems are examples of new technologies that do not require significant employee training.

Robots offer the promise of optimized services and improved efficiency, but have the potential to disrupt customer-provider interactions. In traditional service delivery methods, if authenticity and warmth were valued in interactions with customers, there is a growing concern that providing services through service robots goes against the essential elements of hospitality (Johnson, 2022). In addition, employee morale is a concern. LOTTE HOTEL SEOUL’s guest-centric employees expressed concern and fear that they might be replaced by service robots in the future. There were other employees on the other hand, who saw the positive side of technology—recognizing that service robots can increase work efficiency.

Service robots should not replace the human touch, but rather should be a means of strengthening and maintaining the human touch (Lee et al., 2023, p. 67). When the efficiency that comes with innovation can be balanced with the human touch that defines the customer experience, management, employees, and guests all benefit. Hotels that have successfully achieved this balance not only meet customer expectations but also provide more value (Higueros, 2023). In short, the introduction of these technologies has highlighted the need for balance between technological advantages and workforce impact (Arias-Pérez & Vélez-Jaramillo, 2022).

The Risk of Algorithmic Bias in AI Applications

Privacy has emerged as a significant issue, with service robots’ data processing capabilities requiring rigorous oversight to protect sensitive information—both to protect customer privacy as well as to protect corporations from unethical acts. Indeed, recent research has shown that the hotel industry is one of the main targets for data leakage (Karagiannis, 2024). The use of service robots may introduce the risk of algorithmic bias, resulting in unequal treatment or discriminatory consequences in the way services are provided (Ivanov et al., 2017). This may further complicate the ethical considerations surrounding the integration of these technologies into hotel operations and lead to imbalances in the technology and hospitality industries (Zhang et al., 2022).

To address these issues, hotel management must carefully balance the potential benefits of technology-based solutions with ethical considerations and the essentials of maintaining customer satisfaction (Johnson, 2022). This balance is important to ensure that the introduction of AI-based service robots aligns with the brand identity and value of hotels, and to alleviate the perception of deviating from the way customers have traditionally been served (Nijssen et al., 2016).

The introduction of technologies such as robots in the hotel industry is not just a trend, but a shift toward more efficient, safe, and customer-oriented operations implemented by LOTTE HOTEL SEOUL’s strategic technology deployment (Omrani et al., 2022). The affect on service quality and customer satisfaction must be continuously examined and to explore how robot services are delivered to consumers (Nijssen et al., 2016). These changes have the potential to drive customer-centric service innovation across the hotel industry.

Perceptions of Robot-based Applications in Luxury Lodging Services

The introduction of service robots may be considered to deviate from traditional service delivery norms, which may lead to questions about trust and loyalty to luxury hotels (Nijssen et al., 2016; Omrani et al., 2022). Although consumption behaviors and preferences have changed, there is still a lack of understanding regarding guests’ preferences. These are particularly about how hotel guests accept service robots in the post-pandemic hotels industry. Moreover, studies show that various hotel segments, including luxury hotel, affect how guests perceive and adopt service robots (Gupta et al., 2022; Naeem Abass et al., 2022). In addition, the pandemic has altered hotel guests’ views on service robots, making them more open to these services in luxury hotels, especially when significant health and safety issues are involved (Naeem Abass et al., 2022).

However, looking ahead to the future, service robot integration promises to redefine both the way service is delivered in the traditional hospitality industry, and the industry benchmarks to include modern technological digital sophistication (Higueros, 2023). This means the integration of service robots in the hospitality industry is causing a paradigm shift beyond basic operational improvements. Therefore, hotel leaders can look forward to a future in which the hospitality industry improves by setting new standards which will include service robots.

Achieving a delicate balance between improving the efficiency of operations and utilizing technology while preserving the essential elements of hospitality is paramount to ensuring the long-term success and sustainable growth of the hospitality industry. The influence of AI-based service robots goes beyond the concept of simply running a hotel. The influence will almost certainly set expectations for innovation across the hospitality sector. Here, LOTTE HOTEL SEOUL emerges as an important case study showing the interaction between technological innovation and real-world hospitality industry functions.

Theoretical Implications

The current study investigates factors affecting the integration of service robots through the use of the Modified Technology Acceptance Model (MTAM). Derived from the Technology Acceptance Model (TAM), there are three factors: perceived ease of use, perceived usefulness, and subjective norms that influence customer attitudes toward service robot use (Davis et al., 1989). However, researchers need to pay attention to how other factors influence behavioral intentions, as they may not be fully reflected by perceived ease of use and perceived usefulness (Jabeen & Sadique, 2020). These other factors may vary depending on the technology, target users, and context including external influences (Gefen, 2003). Therefore, in this study, we aimed to design an MTAM which included five external variables (Subjective Norms, Technology Experience, System Interactivity, Self-Efficacy, and Technical Support) identified by the study as an extension of the TAM. The relationship between these external variables is shown in Figure 1.

Figure 1.

Modified technology acceptance model.

The Modified Technology Acceptance Model (MTAM) was selected for this study as it was determined to be appropriate for conveying factors leading to the adoption of service robots at the LOTTE HOTEL SEOUL. This model allows for a deeper exploration of factors influencing technology acceptance, including perceived usefulness, ease of use, and additional variables relevant to the hospitality context (Aggelidis & Chatzoglou, 2009). By assessing these critical determinants within the context of LOTTE HOTEL SEOUL’s service provider, this study aims to provide valuable insights into the factors shaping employee attitudes and behaviors toward service robots and their integration into the hotel’s operations. In the context of the integration of the hospitality industry service robots, the MTAM can be used to assess how hotel guests perceive the usefulness and ease of use of service robots, and how other factors such as trust, privacy concerns, or social influence, affect acceptance of the technology.

Discussion Questions

How do you think LOTTE HOTEL SEOUL ensures equitable treatment while mitigating algorithmic bias and discrimination while introducing AI-powered service robots?

Provide your thoughts on what strategies LOTTE HOTEL SEOUL can use to maintain and commercialize customer trust and loyalty by introducing service robots.

Discuss how LOTTE HOTEL SEOUL can effectively integrate service robots into its brand identity and guest experience, ensuring alignment with its reputation for luxury and exceptional service.

How do customer perceptions of service robots impact their acceptance and satisfaction at LOTTE HOTEL SEOUL, and what measures can be taken to address any concerns or reservations?

What are the long-term implications of LOTTE HOTEL SEOUL’s widespread adoption of service robots for responsible and sustainable growth in the hospitality industry?

To what extent should luxury hotels like LOTTE HOTEL SEOUL balance automation with personalized human service to maintain the exclusivity of their brand? What strategies can be employed to ensure that robots enhance rather than diminish the luxury experience (Naeem Abass et al., 2022)?

How can LOTTE HOTEL SEOUL develop a strategic approach to effectively integrate AI-powered service robots in a luxury setting while ensuring that the technology enhances guest satisfaction and maintains the hotel’s reputation for personalized service (Gupta et al., 2022)?

This case study comprehensively addresses the discussion questions. It dives into how LOTTE HOTEL SEOUL attempts to avoid algorithmic bias, maintain customer trust and loyalty, and smoothly integrate service robots into their brand. In order to build trust, they focus on maintaining a delicate balance between automation and personalized service by being open as to how AI is used and continuously solicit customer feedback. This study also examines the long-term effects of using robots and the concerns of affected employees, and customer expectations. Detailed data and insights from customer feedback and operational reports support these points.

If you are an ICHRIE member, you can access the Teaching Notes for this case study here: https://ichrie.memberclicks.net/jhtc. If you are not an ICHRIE member, the Teaching Notes will be published in a future Sage Business Cases (SBC) annual collection: https://sk.sagepub.com/cases. For more information, please contact info@sagepub.com

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Min Ju Cho

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