International Journal of Hospitality Management 110 (2023) 103437

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International Journal of Hospitality Management

journal homepage: www.elsevier.com/locate/ijhm

The dark side of artificial intelligence in service: The “watching-eye” effect

and privacy concerns
Yaou Hu a, *, Hyounae (Kelly) Min b
a
Jinan University, Guangzhou, Guangdong, China
b
The Collins College of Hospitality Management, California State Polytechnic University Pomona, CA, USA

A R T I C L E I N F O A B S T R A C T

Keywords: The potential privacy issues associated with artificial intelligence (AI) in service delivery require careful
Artificial intelligence attention but remain understudied. Through the lens of the watching-eye effect, this research examines the
Service robots impact of AI on customers’ uneasiness through the mediation of privacy concerns. Study 1 confirms the watching
Watching-eye effect
“camera eye” effect of AI devices. Moreover, it identifies the service setting as a contextual boundary condition,
Privacy concerns
Uneasiness
wherein this effect holds in a private setting but not in a public setting. Study 2 further indicates that when there
is a built-in camera, the “physical eye” in an AI device matters; humanoid AI devices trigger stronger privacy
concerns than nonhumanoid AI devices and tablets, leading to greater uneasiness. This impact affects both
genders but is more pronounced among women. This research extends the AI literature in service and business
ethics and offers insight into managing personal information and privacy issues effectively.

1. Introduction
Artificial intelligence (AI) has gained extensive attention from
scholars, practitioners, and the general public due to its seemingly
promising benefits (Davenport et al., 2020). As a collection of technol­
ogies, such as sensors, voice recognition, robotics, automation, and
intelligent learning (Fan et al., 2022; Huang and Rust, 2018), AI can
offer customers entertaining, efficient, and personalized services as well
as social interaction (Grewal et al., 2021). These devices have intro­
duced and will continue to bring profound changes to the service
landscape, especially in the hospitality and tourism industry.
Given this potential, a growing number of service practitioners are
deploying AI devices in numerous settings. For instance, in-room voice-
based digital assistants have been deployed in hotels such as Aloft and
Wynn Resorts Las Vegas (Buhalis and Moldavska, 2021); the Marriott
Hotel group introduced the Mario robot receptionist, and the Mandarin
Oriental in Las Vegas employs the Pepper robot to engage with cus­
tomers (Choi et al., 2021). At the same time, research institutes and AI
designers are endeavoring to advance AI devices’ technological features.
In one case, human–computer interaction researchers are developing a
social robot to interact with guests and serve as an in-room companion
(Nakanishi et al., 2019).
As the technological capabilities of AI rise, so do the public’s privacy
and security concerns (Ioannou and Tussyadiah, 2021; Tussyadiah et al.,
2019). Customers’ personal information, including biometric data,
identifiers, behavior logs, and biographic details (Ioannou et al., 2021),
can easily be collected and stored when interacting with AI devi­
ces—sometimes even without customers’ knowledge (Manikonda et al.,
2018). What worries customers most is that such information may be
used and distributed in unauthorized ways or be susceptible to security
breaches (Davenport et al., 2020). A recent incident gives truth to this
apprehension: Henn-na Hotel in Japan, known as the first robot-staffed
hotel, modified its in-room robots to block hackers after apologizing for
neglecting guests’ privacy and security (Hertzfeld, 2019).
Despite the hospitality and tourism industry’s relative vulnerability
to privacy violations (Tussyadiah et al., 2019), the potential dark side of
AI has scarcely been studied (Fu et al., 2022; Ioannou et al., 2020).
Privacy issues in service settings also often vary by context (e.g., online
vs. on-site; Ioannou et al., 2020; Morosan, 2019) and by person (e.g.,
Araujo et al., 2020). Customers’ privacy concerns and their subsequent
perceptions and behavior may depend on the interplay between AI de­
vices’ features, the service setting, and individual traits (e.g., Araujo
et al., 2020). It is thus critical for academia and the industry to under­
stand the dynamics of customers’ privacy concerns amid recent break­
throughs in AI (Manikonda et al., 2018) while accounting for situational
and personal characteristics (Tussyadiah et al., 2019).

* Corresponding author.
E-mail address: yaouhu@outlook.com (Y. Hu).

https://doi.org/10.1016/j.ijhm.2023.103437
Received 22 May 2022; Received in revised form 28 December 2022; Accepted 30 January 2023
Available online 10 February 2023
0278-4319/© 2023 Elsevier Ltd. All rights reserved.
Y. Hu and H.(K. Min
To bridge this knowledge gap in literature, the present research
considers customers’ privacy concerns when interacting with AI devices
through the lens of the “watching-eye” effect. Extending the theory of
the watching-eye effect (Esmark et al., 2017; Haley and Fessler, 2005),
this work suggests that, as a form of social presence (van Doorn et al.,
2017), AI devices may make customers feel like they are being watched
and in turn spark privacy concerns and a sense of unease. The “watch­
ing-eye” can take two forms in AI devices: the camera eye (i.e., built-in
cameras) and the physical eye (i.e., in AI devices’ appearance).
Responding to calls to explore people’s privacy concerns in different
contexts (e.g., Tussyadiah et al., 2019; Yoganathan et al., 2021), this
research also tests the boundary conditions of such an effect—both
context-specific (i.e., the service setting) and individual-specific (i.e., the
customer’s gender). A series of two empirical studies were carried out to
address these aims. Study 1 examined the effects of the watching
“camera eye” in an AI device on customers’ privacy concerns and un­
easiness. Study 1 also identified the service setting (public vs. private) as
a contextual factor of this effect. Building on these findings, Study 2
investigated the impact of the watching “physical eye” in an AI device (i.
e., the device’s appearance). Customer gender was taken as a critical
boundary condition of this effect.
This research adds insightful contributions to the emerging AI liter­
ature in service and business ethics. It enriches the understanding of the
watching-eye effect when customers interact with AI devices in service
settings and uncovers the mechanism driving customers’ privacy con­
cerns. It further unveils the boundary conditions of this watching-eye
effect. Moreover, it adds insights to the business ethics research
regarding AI. Scholars have provided the conceptual foundation for the
key debates in AI ethics (Ivanov and Umbrello, 2021); they are calling
for research addressing the emerging ethical concerns of AI (Haenlein
et al., 2022) and designing AI devices that ameliorate such ethical ten­
sions (Ivanov and Umbrello, 2021). This research responds to this call by
providing meaningful implications to help service practitioners and AI
device designers manage privacy issues, mitigate potential risks, and
increase customers’ confidence. The results could also help customers
make informed decisions about their privacy when using AI devices.
2. Literature review and hypothesis development
2.1. Artificial intelligence in service and privacy concerns
AI, which consists of a family of technologies that acquire, process,
analyze, and return helpful information (Grewal et al., 2021), is often
embodied in machines or devices that can sense, understand, learn, and
exhibit certain aspects of human intelligence (Huang and Rust, 2018).
Based on whether an AI device has a virtual presence or a physical
embodiment (Tung and Law, 2017), AI-powered devices can take a
variety of forms. AI devices common in service settings include virtual
bots, digital assistants embedded in smartphones or tablets (e.g., Apple’s
Siri) or standalone devices (e.g., Amazon’s Alexa), and nonhumanoid
and humanoid service robots (e.g., Buhalis and Moldavska, 2021). These
devices have been deployed in multiple settings to deliver an array of
services and to satisfy customers’ needs, ranging from simple tasks such
as check-in and luggage transportation to advanced capabilities such as
social interaction and companionship (Hu et al., 2020; Huang and Rust,
2018). The application of AI in the service industry is generally viewed
with optimism (Grewal et al., 2021).
Along with the ongoing development of AI and associated technol­
ogies, the potential dark side of AI has gained researchers’ attention.
Privacy is a crucial ethical issue in the era of AI (Grewal et al., 2021;
Ivanov and Umbrello, 2021). Data privacy has long been a prominent
topic in consumer research and information studies (e.g., Bleier et al.,
2020; Xu et al., 2011), and AI and related innovations have birthed new
challenges (e.g., Bleier et al., 2020; Haenlein et al., 2022; Ivanov and
Umbrello, 2021; Ebbers et al., 2021). AI and related technologies rely
heavily on customers’ personal information (Ebbers et al., 2021). A
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International Journal of Hospitality Management 110 (2023) 103437
range of sensitive information collected while people travel and stay at
service facilities (e.g., identity details, biometric data, and behavioral
logs) might be susceptible to data breaches, identity theft, and hacking
(Tussyadiah et al., 2019).
Such risks may increase customers’ privacy concerns, mitigate their
trust in AI, and reduce their acceptance of AI technologies, leading to
negative consequences for AI adoption and management (Martin and
Murphy, 2017). The design features of AI devices (Ebbers et al., 2021;
Manikonda et al., 2018) have been shown to influence customers’ pri­
vacy perceptions as well. Scholars have hence advocated for more
research on the interplay of AI design features, service contextual factors
(Tussyadiah et al., 2019), and customers’ characteristics (Ioannou et al.,
2020) on customers’ privacy perceptions. Building upon prior work, this
research addresses customers’ privacy concerns based on the dynamics
of AI design features, service settings, and gender against the theoretical
backdrop of the watching-eye effect.
2.2. The watching-eye effect
Traditionally, the watching-eye effect applies to situations where
individuals are watched by social others (Haley and Fessler, 2005).
When feeling as though one is being watched, the person being observed
may modify their behavior in accordance with social rules (e.g., acting
altruistically) because they care about how others perceive them (Pfat­
theicher and Keller, 2015). Beyond the original context of being watched
by other people, studies have extended the watching-eye effect to subtle
and artificial surveillance cues such as the image of eyes (Haley and
Fessler, 2005) and cameras (Tussyadiah and Miller, 2019). In other
words, simply being in an environment where stylized eyes are present
evokes a sense of being seen.
People may feel uncomfortable (i.e., uneasy) when another social
entity is watching them because of perceived privacy invasion. For
example, when a store employee gazes at a shopper, the customer may
feel watched and as though their privacy control is lost (Esmark et al.,
2017). This effect might also hold in service encounters with AI devices:
owing to their intelligent and interactive features, these devices could be
seen as a social presence or social entities rather than simply machines
(Fan et al., 2022; Tussyadiah and Miller, 2019; van Doorn et al., 2017).
When customers view an AI device with “eyes” as another social entity
that occupies a shared space, they may feel watched (Tussyadiah and
Miller, 2019) and thus experience privacy concerns and uneasiness.
Based on AI devices’ design features, this research suggests that the
watching-eye(s) of AI devices can assume two forms: the built-in
“camera eye” and the physical eye(s) as displayed in devices’ appear­
ance (e.g., Choi et al., 2021; Nakanishi et al., 2019).
2.2.1. The built-in “camera eye”
In the hospitality and tourism contexts, AI devices and associated
technologies (e.g., digital assistants and robots) are often equipped with
cameras and sensors to facilitate customized service delivery and to
optimize customers’ experiences (e.g., Nakanishi et al., 2019). For
instance, facial recognition has been widely used across service settings
(Leong, 2019). More AI-powered tablets, digital assistants, and robots
are now being embedded with video cameras (e.g., Jackson and Ore­
baugh, 2018; Jia et al., 2021).
Despite the best intentions of AI device developers and the practi­
tioners who adopt such technologies, customers may feel uncomfortable
being exposed to these cameras (Caine et al., 2012). People may feel like
they are under constant surveillance and that their every move is being
recorded (Leong, 2019). In addition, because data captured by these
cameras might be used without customers’ knowledge and can be sus­
ceptible to hacking, the mere display of cameras may arouse privacy
concerns. Furthermore, customers’ perceptions matter. Customers may
not always be able to identify the cameras installed in an AI device
simply by looking at it (Lee et al., 2011). Occasionally, a device’s design
can be deceptive (Danaher, 2020); some customers may not recognize
Y. Hu and H.(K. Min
the “eyes” of the AI device whereas others remain acutely aware of the
camera. Thus, customers’ perceptions of cameras affect their privacy
concerns and subsequent responses (Lee et al., 2011). When customers
perceive a built-in camera in an AI device, they may feel watched and
have privacy concerns (Jackson and Orebaugh, 2018), provoking feel­
ings of unease. The first hypothesis is proposed accordingly:
H1. : Customers’ perceptions of a built-in camera in AI devices affect
their uneasiness through the mediation of privacy concerns.
2.2.2. The boundary condition of service setting
AI devices are deployed across service contexts. There are certain
public settings in which these devices are relatively more acceptable to
customers; that is, although customers are aware of devices’ cameras,
they tend to feel less concerned about privacy and more comfortable
using these devices. For example, some AI devices use cameras with
facial recognition systems at airports and train stations (Naudé, 2020) to
enable customers to purchase tickets and complete self-check-in. This
convenience renders the service process more efficient and has helped to
minimize human interaction during the COVID-19 pandemic. Similar
self-check-in devices with facial recognition can also be seen at hotels’
front desks (Morosan, 2019).
By contrast, customers’ behavioral information becomes more per­
sonal and sensitive in relatively private service settings such as hotel
rooms or private restaurant rooms. In such places, AI devices equipped
with cameras or simply “listening” features can make people uncom­
fortable due to privacy concerns (Manikonda et al., 2018). A notable
example is the deployment of Amazon Echo in hotel rooms. With a
camera, speaker, and AI technology, Echo has sparked strong privacy
concerns and unease among guests because it might make their in-room
data vulnerable to attackers (Jackson and Orebaugh, 2018). The service
setting (public vs. private) might therefore play a role in the
watching-camera-eye effect of AI devices; compared with a public
setting, this effect may induce greater privacy concerns and subsequent
uneasiness for customers in a private setting. The following hypotheses
are hence put forth:
H2. : The service setting (public vs. private) moderates the effect of
customers’ perceptions of a built-in camera in an AI device on privacy
concerns; the effect on privacy concerns is stronger in a private setting
than in a public setting.
H3. : The service setting (public vs. private) moderates the mediation
effect of privacy concerns on the relationship between customers’ per­
ceptions of a built-in camera and customers’ uneasiness.
2.2.3. The physical eye (appearance of AI devices)
Among popular AI-powered devices (e.g., tablets or kiosks, digital
assistants, and service robots) in the service industry, some possess
anthropomorphic (i.e., human-like) features such as a physical appear­
ance, facial expressions, gestures, and human voices (e.g., Jia et al.,
2021). Physical appearance is one of the most prominent features of AI
anthropomorphism (Blut et al., 2021). This research thus focuses on the
eye-watching effect of AI devices’ physical appearance (especially
“eyes”).
Anthropomorphic design cues can influence customers’ perceptions
in different ways (Blut et al., 2021). Some researchers have discovered
that anthropomorphism positively affects human–AI interaction (e.g.,
Yang et al., 2021), while others have revealed that it can compromise
customers’ perceptions (Choi et al., 2021). Service settings play a key
part in these mixed effects (Blut et al., 2021; Yang et al., 2021). Cus­
tomers’ behavioral information is especially pertinent in private service
settings: the more anthropomorphic an AI device appears, the higher its
perceived social presence (Damiano and Dumouchel, 2018). Customers
in turn have a stronger sense of being watched (Tussyadiah and Miller,
2019) and increased anxiety, uncomfortableness, and tension (Yogana­
than et al., 2021). This logic is congruent with the watching-eye effect.
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International Journal of Hospitality Management 110 (2023) 103437
Customers may feel as though an AI device with a human-like appear­
ance and eyes (e.g., humanoid) is constantly staring at them in a private
service setting, compared with AI devices with no eyes (e.g., a tablet or
nonhumanoid). They then may become more uneasy staying in the
service setting because of higher privacy concerns as postulated:
H4. : In a private service setting, the appearance of an AI device with a
built-in camera (tablet vs. nonhumanoid vs. humanoid) affects cus­
tomers’ uneasiness through the mediation of privacy concerns.
2.2.4. The boundary condition of customer gender
Gender differences in privacy concerns and affiliated effects on
people’s behavior have been identified in the literature on technology
usage (e.g., Garbarino and Strahilevitz, 2004; Hoy and Milne, 2010;
Sheehan, 1999; Wu et al., 2012). Studies have demonstrated that, in
terms of online information sharing, women express stronger privacy
concerns than men (e.g., Fogel and Nehmad, 2009; Hoy and Milne,
2010; Sheehan, 1999). Further, when facing a potential threat to pri­
vacy, customers of each gender deal with it differently: men are more apt
to be confrontational in reacting to privacy concerns, whereas women
tend to display less proactive behavior (Sheehan, 1999).
Regarding the impacts of privacy concerns on individuals’ psycho­
logical responses, a study of visually impaired customers’ concerns
about camera-based assistive applications revealed that women were
more uncomfortable than men (Akter et al., 2020). A similar effect was
found for teenagers (Youn and Hall, 2008). The possibility of a privacy
breach concerns both genders, although women perceive higher risks
and severity associated with the potential consequences of a privacy
violation (Garbarino and Strahilevitz, 2004; Hoy and Milne, 2010). It is
reasonable to anticipate that, in the AI era, women may feel more uneasy
(vs. men) when encountering privacy concerns about a “staring” AI
device. Stated formally:
H5. : Customer gender (male vs. female) moderates the effect of pri­
vacy concerns on customers’ uneasiness, such that the effect of privacy
concerns on customers’ uneasiness is stronger for women than for men.
H6. : Customer gender (male vs. female) moderates the mediation
effect of privacy concerns on the relationship between the appearance of
AI devices (tablet vs. nonhumanoid vs. humanoid) and customers’ un­
easiness through the mediation of privacy concerns.
Fig. 1 illustrates the theoretical model guiding this research. To test
the hypotheses, Study 1 examined the “customers’ perceptions of a built-
in camera → privacy concerns → uneasiness” relationship and the
moderating role of service setting. Based on the findings of Study 1,
Study 2 further tested the “type of AI devices → privacy concerns →
uneasiness” relationship, taking the effect of customer gender as a
boundary condition.
3. Study 1
3.1. Methods
3.1.1. Study design and procedures
A scenario-based quasi-experimental design was adopted. Data were
collected on Qualtrics via an online survey questionnaire. The re­
spondents were adults who hail from the United States. Respondents
were randomly assigned to one of the two experimental conditions
through Qualtrics professional services. Respondents were asked to read
a scenario in which they imagined traveling alone to a new city and
staying at a fictional hotel (X). The service setting was manipulated
(public hotel lobby vs. private hotel room). In the public setting condi­
tion, respondents were asked to imagine entering the hotel lobby and
noticing an AI robot concierge (shown in an image) on the counter. This
portion of the survey read, “You are traveling alone to a new city. You made
a three-night reservation at Hotel X. When you enter the hotel lobby, you
notice that there is an artificial intelligent robot on the counter. It is a voice-
Y. Hu and H.(K. Min
Fig. 1. Theoretical research model.
activated concierge. It can interact with you via multiple sensors. It greets you
with a voice and offers to create a highly personalized, interactive, and
intelligent experience for you.”
In the private setting condition, respondents were asked to imagine
themselves entering their hotel room and noticing an artificial intelli­
gent robot companion (shown in an image) on their nightstand: “You are
traveling alone to a new city. You made a three-night reservation at Hotel X.
When you enter your room, you notice that there is an artificial intelligent
robot on the nightstand beside your bed. It is a voice-activated in-room
companion. It can interact with you via multiple sensors. It greets you with a
voice and offers to create a highly personalized, interactive, and intelligent
guest room for you.” Respondents indicated their perceptions of a built-in
camera by answering the following yes-or-no question: “In the scenario
that you read, do you think the robot has a built-in camera?”1 Respondents
then responded to questions regarding this study’s main constructs,
completed a realism check, and provided their demographic
information.
3.1.2. Measures
Measurement items for this study were adapted from the literature
and modified to fit the study context (see detailed items in the Appen­
dix). Specifically, privacy concerns were assessed using nine items
adapted from Ng and colleagues (Ng et al., 2020), scored on a 5-point
Likert-type scale (1 = strongly disagree, 5 = strongly agree). Uneasiness
was evaluated with four items adapted from Piçarra and Giger (2018)
using a 5-point scale (1 = strongly disagree, 5 = strongly agree). Disposi­
tion to value privacy (DTVP) was measured with three items from Xu
and colleagues (2011), rated on a 5-point Likert-type scale (1 = strongly
disagree, 5 = strongly agree). Previous privacy experience (PEXP) was
1 respective constructs with acceptable coefficients. These results re­
This study measured customers’ perceptions of a built-in camera rather than
the existence of a camera for several reasons. Since the use of AI devices in the
service context is relatively new, we conducted a pilot study (n = 69, Mage =
36.75, SD = 13.59) to explore which variable provides more meaningful
contribution. To control the potential impact of AI devices’ anthropomorphism,
two robot designs were used: Amazon’s Alexa (nonhumanoid) and Marriott’s
Mario (humanoid). The pilot study showed respondents the same images of AI
devices as in the main study (Alexa and Mario). Among pilot study respondents,
30 had previously interacted with AI devices in service encounters; of them,
more than half (63.33%) reported that the service providers seldom explicitly
stated whether the AI devices had a built-in camera. As such, more often than
not in real service settings, customers are not informed of whether an AI device
has a camera; they must judge for themselves. Moreover, even when re­
spondents in the pilot study were told that the AI devices were not equipped
with cameras, they did not feel assured across settings (1 = not at all assured,
7 = extremely assured) [Mlobby = 3.87, SD = 1.83, t(68) = − 14.21, p < 0.001;
Mroom = 2.86, SD = 1.90, t(68) = − 18.17, p < 0.001]. Thus, the main study
focused on customers’ perceptions of a built-in camera rather than on the actual
existence of a camera.
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International Journal of Hospitality Management 110 (2023) 103437
measured with three items from Xu et al. (2011) on a 5-point Likert-type
scale (1 = never, 5 = very often).
3.1.3. Sample characteristics and realism check
To ensure data quality, respondents agreed at the beginning of the
survey to answer all questions as accurately as possible. An attention-
check question asking respondents to select a certain answer (e.g.,
neutral) was presented next. Surveys from respondents who did not
answer correctly were discarded. After data screening, 322 valid ques­
tionnaires remained (npublic = 160, nprivate = 162). Among all re­
spondents, 50.9% were men, 76.4% were Caucasian, and 41.9% were
married. Respondents’ mean age was 40.15 years (SD = 14.20), ranging
from 18 to 70. The scenarios’ realism was verified based on the item “I
think this scenario is realistic” (1 = strongly disagree, 5 = strongly agree).
Respondents perceived the scenarios as realistic [M = 3.71, SD = 1.19, t
(321) = 10.71, p < .001].
3.2. Results
3.2.1. Data normality, measurement validity, and reliability
All continuous variables’ data distribution was evaluated first. The
mean values of measurement items ranged from 2.49 to 4.08; standard
deviations ranged from.98 to 1.38. The skewness values of items span­
ned between − 1.08 and.41, and kurtosis values were between − 1.09
and.38. The items were thus normally distributed. The construct validity
and reliability of multi-item constructs were then calculated. The overall
measurement model had an excellent fit to the data (χ 2 = 414.63, df =
146, χ 2/df = 2.84, CFI =.94, RMSEA =.08, SRMR =.06). The main
constructs had acceptable average variance extracted (AVE) values
(range:.51–.84). Moreover, all items had significant loadings on their
flected convergent validity. In addition, the correlation between the
main constructs of interest in this study (i.e., privacy concerns and un­
easiness) was significant (r = .67, p < .001) but lower than the square
roots of both constructs’ AVE values, indicating discriminant validity.
Lastly, all constructs had composite reliability values larger than.70 (see
Appendix), denoting acceptable reliability.
3.2.2. Results of mediation model
A mediation analysis was conducted via Hayes PROCESS Macro
Model 4 (Hayes, 2017). The construct of customers’ perceptions of a
built-in camera was dummy coded (no = 0, yes = 1) and entered as the
independent variable, uneasiness served as the dependent variable, and
privacy concerns represented the mediator. Customers’ age, gender,
DTVP, PEXP, and AI devices’ anthropomorphism (no = 0, yes =1) were
used as covariates. While controlling for covariates, customers’ per­
ceptions of a built-in camera had a significant positive effect on privacy
concerns [b = .43, t(315) = 3.71, p < .01]. Privacy concerns had a
Y. Hu and H.(K. Min International Journal of Hospitality Management 110 (2023) 103437

significant positive effect on uneasiness [b = .77, t(314) = 12.39, privacy concerns, DTVP, and PEXP) as in Study 1 and the measures of
p < .01]. When controlling for covariates and privacy concerns, cus­ intention to stay in the hotel for additional analysis. Items related to
tomers’ perceptions of a built-in camera had no significant effect on respondents’ uneasiness staying in the room were modified slightly for
uneasiness [b = − .05, t(314) = − .34, p > .05]. The analysis also the in-room service setting (e.g., “If I stayed at the hotel room, I would feel
revealed a significant indirect effect: customers’ perceptions of a built-in worried”; “If I stayed at the hotel room, I would feel uncomfortable”). Two
camera → privacy concerns → uneasiness (a × b =.33, 95% confidence attention-check questions were integrated throughout the survey, asking
interval [CI]: [.16,.53]). Therefore, privacy concerns fully mediated the respondents to select a certain answer (e.g., strongly disagree). Re­
impacts of customers’ perceptions of a built-in camera and uneasiness. spondents who failed any of the attention checks were screened out.
H1 was supported as a result. Ultimately, 298 questionnaires were valid (ntablet = 95, nnonhumanoid =
107, nhumanoid = 96). Slightly less than half of all respondents (47.7%)
3.2.3. Moderating role of service setting were men, 81.5% were Caucasian, and 41.6% were married. Their mean
A moderated mediation analysis was conducted using Hayes PRO­ age was 41.82 years (SD = 15.15; range: 18–85). Respondents perceived
CESS Macro Model 7 (Hayes, 2017) to test H2 and H3. Service setting the scenarios as realistic [M = 3.60, SD = 1.12, t(297) = 39.97,
(public = 0, private = 1) was entered as a moderator in the previous p < .001].
mediation model. Results are displayed in Fig. 2. The interaction term
between customers’ perceptions of a built-in camera and service setting
4.2. Results
had a significant positive effect on privacy concerns [b = .45, t(313) =
2.01, p < .05]; as such, H2 was supported. Specifically, when the service
4.2.1. Data normality, measurement validity, and reliability
setting was private, customers’ perceptions of a built-in camera had a
The mean values of variables ranged from 2.41 to 4.14; standard
significant impact on privacy concerns [b = .65, t(313) = 4.23, p < .01].
deviations ranged from.97 to 1.32. The skewness values ranged from
However, when the service setting was public, customers’ perceptions of
− 1.22 to.41, and kurtosis values were between − .77 and.97. These
a built-in camera had no significant effect on privacy concerns [b = .19, t
values were all within an acceptable range, indicating data normality.
(313) = 1.15, p > .05].
Construct validity and reliability were measured next. The overall
Findings also revealed a significant index of moderated mediation
measurement model showed an excellent fit to the data (χ 2 = 396.76, df
(index =.35, 95% CI: [.02, 72]). The conditional indirect effect analysis
= 146, χ 2/df = 2.72, CFI =.95, RMSEA =.08, SRMR =.06). Constructs’
further indicated that, when the service setting was private, customers’
AVE values were.70 (privacy concerns),.84 (uneasiness),.58 (DTVP),
perceptions of a built-in camera had a significant indirect effect on un­
and.43 (PEXP). All items had significant loadings on their corresponding
easiness through privacy concerns (a × b =.50, 95% CI: [.25, 79]). This
constructs. Every item, except for one related to PEXP, had a loading
indirect effect became non-significant when the service setting was
higher than.50. These results indicate convergent validity. All constructs
public (a × b =.15, 95% CI: [− .07, 37]).
had composite reliability values larger than.70 except for PEXP,
denoting adequate reliability. Because PEXP was used as a control var­
4. Study 2
iable and not one of the main constructs of interest in this study, the
measurements for PEXP remained unchanged. In addition, the correla­
4.1. Methods
tions between constructs were all significant but lower than the square
root of each construct’s AVE (see Appendix), indicating discriminant
4.1.1. Study design and procedures
validity.
Data for Study 2 were gathered on Qualtrics via an online survey
questionnaire using a scenario-based quasi-experimental design. The
4.2.2. Results of the mediation model
respondents were adults who hail from the United States. Respondents
A mediation analysis was conducted using Hayes’s PROCESS Macro
were randomly assigned to the experimental conditions through Qual­
Model 4 (Hayes, 2017). The appearance of AI devices (tablet vs. non­
trics professional services. The scenarios were inspired by Tussyadiah
humanoid vs. humanoid) was sequentially coded into two variables, X1
and Miller’s (2019) work. Respondents were randomly assigned to one
and X2. Specifically, the tablet group was coded as X1 = 0 and X2 = 0;
of the three experimental conditions. Respondents were asked to read a
the nonhumanoid group was coded as X1 = 1 and X2 = 0; and the hu­
scenario about imagining traveling alone to a new city and staying at a
manoid group was coded as X1 = 1 and X2 = 1. This coding method
fictional hotel (X). The appearance of the AI device (i.e., tablet, non­
allowed for subsequent analysis to sequentially compare the non­
humanoid, or humanoid) was manipulated by differing the scenarios’
humanoid group with the tablet group and the humanoid group with the
descriptions and images. The image of the tablet was a typical image of a
tablet with no brand indicated to control for potential confounding ef­
fects. The nonhumanoid condition used an image of Amazon’s Alexa,
and the humanoid condition used an image of Marriott’s Mario robot.
In the scenario, respondents were asked to imagine themselves
entering their hotel room and noticing an artificial intelligent device
(also shown in images) on their nightstand. The scenario indicated that
the device was a voice-activated in-room companion that could interact
with customers via a camera and sensors. The scenario read, “You are
traveling alone to a new city. You made a three-night reservation at Hotel X.
When you enter your room, you notice that there is an artificial intelligent
tablet/robot on the nightstand beside your bed. It is a voice-activated in-room
companion. It can interact with you via a camera and multiple sensors. It
greets you with a voice and offers to create a highly personalized, interactive,
and intelligent guest room for you.” Respondents then answered questions
regarding the study’s main constructs, a realism check, and personal
demographics.

4.1.2. Measures, sample characteristics, and realism check

Study 2 used the same measurements for main constructs (i.e.,

5
Y. Hu and H.(K. Min International Journal of Hospitality Management 110 (2023) 103437

Fig. 2. Results of Study 1. Notes: Values are unstandardized regression coefficients. Customers’ perceptions of a built-in camera and service setting were dummy
coded. * p < .05, * * p < .01. The dashed line indicates a non-significant path.

nonhumanoid group. Then, X1 and X2 were entered as independent

Table 1
variables. Uneasiness was entered as the dependent variable, and pri­
Results of regression analysis.
vacy concerns were used as the mediator. Customers’ age, DTVP, and
PEXP were used as covariates. Dependent variables

Results revealed that, while controlling for covariates, X1 (non­ Variables Privacy Uneasiness Uneasiness
humanoid vs. tablet) had no significant effect on privacy concerns [b concerns Mediation Moderated
Mediation model mediation model
= − .08, t(292) = − .64, p > .05], but X2 (humanoid vs. nonhumanoid)
model
had a significant positive impact on such concerns [b = .40, t(282) =
3.21, p < .01]. Privacy concerns had a significant positive effect on Constant 1.61** -.15** 3.04**
X1 (nonhumanoid vs. -.08 -.14 -.13
uneasiness [b = .85, t(291) = 15.38, p < .01]. When controlling for the
tablet)
covariates and privacy concerns, both X1 [b = − .14, t(291) = − 1.15, X2 (humanoid vs. .40** .10 .07
p > .05] and X2 [b = .10, t(291) = .82, p > .05] had no significant ef­ nonhumanoid)
fects on uneasiness. The analysis also uncovered a significant indirect Customer gender (male = .22*
0, female = 1)
effect for the X2 → privacy concerns → uneasiness path (a × b =.34, 95%
Privacy concerns .31**
CI: [.14,.56]) but not the X1 → privacy concerns → uneasiness path (a × × Customer gender
b = − .07, 95% CI: [− .30,.15]). Therefore, privacy concerns partially Privacy concerns .85** .85**
mediated the effect of appearance of AI devices and uneasiness.2 H4 was Age .01* -.002 .0001
partially supported. DTVP .37** .10 .11
PEXP .23** .05 .09
F test F(5, 292) F(6, 291) F(8, 289)
4.2.3. Moderating role of customer gender = 14.48** = 55.30** = 45.04**
A moderated mediation model was tested using Model 14 of the R2 .20** .53** .55**
PROCESS Macro (Hayes, 2017); results are presented in Table 1 and
Notes: X1 and X2 are sequential coded variables. Tablet condition: X1 = 0,
Fig. 3. Customer gender was dummy coded (male = 0, female = 1) and X2 = 0; nonhumanoid: X1 = 1, X2 = 0; humanoid condition: X1 = 1, X2 = 1.
entered as the moderator. Customer gender significantly moderated the Values are unstandardized regression coefficients. * p < .05, * * p < .01.
relationship between privacy concerns and uneasiness [b = .31, t
(289) = 3.10, p < .01]. The conditional effect of privacy concerns on concerns on uneasiness was much stronger than for men [b = .69, t
uneasiness depending on customer gender is depicted in Fig. 4. For (289) = 9.51, p < .01]. H5 was hence supported.
women [b = .99, t(289) = 13.28, p < .01], the impact of privacy Moderated mediation indices and conditional indirect effects were
assessed to test H6 (Table 2). When comparing a nonhumanoid device
with a tablet, the index of moderated mediation was non-significant
2 (index = − .02, 95% CI: [− .11,.06]). The indirect effects were non-
To further reveal the potential behavioral outcome of the proposed effects,
we conducted an additional analysis using ‘intention to stay in the hotel’ as the
significant for both female and male customers. When comparing hu­
consequence variable of the proposed model (i.e., besides the proposed medi­ manoid and nonhumanoid devices, the index of moderated mediation
ational model, adding three direct paths from the appearance of AI devices, was significant (index =.12, 95% CI: [.03,.25]). The conditional indirect
privacy concerns, and uneasiness of staying in the room to intention to stay in effects based on customer gender were thus significantly different. For
the hotel). Intention to stay in the hotel was measured with three items (i.e., I men, compared with a nonhumanoid device, a humanoid device had a
am willing to stay at a hotel room like this in the future; I would recommend significant indirect effect through privacy concerns on uneasiness (a × b
others to stay at hotel rooms like this; I plan to stay at a hotel room like this in =.28, 95% CI: [.11,.45]). This indirect effect became even stronger for
the future; Cronbach’s alpha = 0.92). Results show that the intention to stay in women (a × b =.40, 95% CI: [.16,.65]). Accordingly, H6 was partially
the hotel is the subsequent variable of uneasiness [b = − .68, t(290) = − 13.60, supported.
p < .01]; the direct paths from the appearance of AI devices and privacy con­
cerns on the intention to stay in the hotel are non-significant. Moreover, the
5. General discussion
analysis revealed a significant indirect effect for the X2 → privacy concerns →
uneasiness → intention to stay in the hotel path (indirect effect = − .23, 95% CI:
[− .38, − .10]) but not the X1 → privacy concerns → uneasiness → intention to 5.1. Theoretical contributions
stay in the hotel path (indirect effect =.05, 95% CI: [− .10,.20]). Since (1) this is
not the main focus of this study (2) the direct paths to behavioral intention have The findings of this research provide several theoretical contribu­
been established in prior studies, and (3) it is ideal to maintain a parsimonious tions. First, this research contributes to AI ethics literature by
model, this additional analysis was not incorporated into the main model.

6
Y. Hu and H.(K. Min International Journal of Hospitality Management 110 (2023) 103437

Fig. 3. Results of Study 2. Notes: Values are unstandardized regression coefficients. The appearance of AI devices was sequentially coded, and customer gender was
dummy coded. * p < .05, * * p < .01.

(Ivanov and Umbrello, 2021). Particularly, although few prior studies

subscribing to AI ethics have raised potential ethical issues such as
privacy and surveillance (e.g., Haenlein et al., 2022; Ivanov and
Umbrello, 2021), limited empirical evidence has been provided.
Expanding upon the watching-eye effect, this research is one of the first
to provide empirical evidence that AI devices can be perceived as the
“eyes” of others which can invade one’s privacy. The watching-eye ef­
fect indicates that a sense of being watched can influence one’s per­
ceptions and behavior (Pfattheicher and Keller, 2015). Studies have
shown that AI devices can be perceived as social entities rather than
simply machines, suggesting that people can feel “seen” by these devices
(Fan et al., 2022; Tussyadiah and Miller, 2019; van Doorn et al., 2017).
This study found that the mere existence of AI devices does not make
people feel uncomfortable, but when people perceive the “eyes” of these
devices, they become concerned that their privacy might have been
invaded.
Further, this study implies a boundary condition based on which the
impact of customers’ perceptions of the camera may vary. The positive
effect of a perceived camera on privacy concerns did not manifest in the
public context; even customers who perceived the “eyes” of AI devices
did not report heightened privacy concerns when in a public place such
as a hotel lobby. However, customers in private settings such as hotel
Fig. 4. Conditional effect of privacy concerns on uneasiness based on rooms felt uncomfortable about their privacy. This discrepancy might
customer gender. have emerged due to the nature of public and private spaces.
Next, this study expands the literature on AI in service settings. The
swift development of technology and AI has amplified the need to un­
Table 2
derstand the roles of AI devices such as service robots (e.g., Jia et al.,
Conditional indirect effects of the moderated mediation model.
2021; Tussyadiah and Miller, 2019). While related theoretical devel­
Variables Indirect effects Customer gender opment is noticeable, most studies have focused on the positive effects of
Male Female robots and other AI devices (e.g., Grewal et al., 2021; Yoganathan et al.,
X1 (nonhumanoid Appearance of AI devices a × b = − .06 a × b = − .08 2021). The current research asserts that AI device usage is not uniformly
vs. tablet) → Privacy concerns → 95% CI: 95% CI: positive. If not carefully utilized, AI devices can make customers feel
Uneasiness [− .25,.12] [− .34,.18] uneasy. The findings of this research suggest that human-like charac­
Index of moderated Index = − .02, 95% CI: teristics (i.e., having a camera to observe customers or having a
mediation [− .11,.06]
X2 (humanoid vs. Appearance of AI devices a × b = .28* a × b = .40*
human-like appearance) make customers feel uneasy and concerned
nonhumanoid) → Privacy concerns → 95% CI: 95% CI: about their privacy at private service settings. Interestingly, the differ­
Uneasiness [.11,.45] [.16,.65] ences between a device with minimal AI functions (e.g., a tablet) and
Index of moderated Index = .12*, 95% CI: [.03,.25] one with more advanced functions (e.g., a voice-activated personal as­
mediation
sistant such as Amazon Echo) were not readily apparent. Anthropo­
Notes: X1 and X2 are sequential coded variables. Tablet condition: X1 = 0, morphic characteristics, not device functionality, thus engender privacy
X2 = 0; nonhumanoid: X1 = 1, X2 = 0; humanoid condition: X1 = 1, X2 = 1. concerns and cause customers to feel uneasy.
Values are unstandardized regression coefficients. * p < .05, * * p < .01. Finally, this research extends knowledge of AI in service by pin­
pointing gender as a viable trait that influences the effect of the dark side
demonstrating that the design features of AI devices rather than the of AI. Individual attributes have been well studied as significant
mere existence of AI devices can cause ethical issues such as invasion of moderating factors influencing the impacts of AI devices on customers’
privacy. Although close customer-employee interactions are the basis of behavior and emotions (e.g., Chi et al., 2022; Fogel and Nehmad, 2009).
the service industry (Zeithaml et al., 1985), and AI and robots have However, demographic characteristics are rarely deemed impactful
replaced some of the intimate roles of employees, ethical concerns from when considering the roles of AI devices. This study reveals that de­
the use of AI and robots in service organizations have been overlooked mographic characteristics such as gender significantly shape customers’

7
Y. Hu and H.(K. Min
perceptions and emotions, especially when viewing AI through a nega­
tive lens. In particular, compared to their male counterparts, female
customers are more likely to feel uncomfortable with more human-like
AI devices due to increased privacy concerns. These findings align
well with prior work theorizing that women are more susceptible to
privacy issues than men (Fogel and Nehmad, 2009; Hoy and Milne,
2010; Sheehan, 1999).
5.2. Practical implications
The findings of this research also provide practical implications for
the service industry. First, results suggest that caution must be exercised
when service organizations attempt to adopt AI devices. While AI de­
vices resembling humans can boost customers’ satisfaction and enjoy­
ment (Grewal et al., 2021; Hu et al., 2021), these devices may concern
customers if used in private spaces. Thus, nonhumanoid devices should
be used in private settings, and humanoid devices with anthropomor­
phic characteristics should be introduced in public spaces. For instance,
healthcare services should use fewer humanoid devices, such as kiosks in
individual treatment rooms, while more humanoid devices should be
used in public spaces, such as waiting rooms. In this way, customers are
less likely to feel monitored, and their privacy would be violated while
receiving medical services. As another example, hotels should put
human-like robots in the front office but place tablets in hotel rooms.
Doing so will allow hotels to enjoy the benefits of these tools while
avoiding the devices’ dark side.
Next, service organizations should tailor their services based on
gender. Results indicate that privacy concerns elicit more intense
negative emotions among women than among men. That is, when
perceiving AI devices as privacy threats, female customers (vs. their
male counterparts) feel more uneasy. To alleviate the possible effects of
negative emotions, employees can notify customers about AI devices.
For example, customers can be told at check-in about the benefits of AI
devices but reassured that, if they wish, such devices can be disabled or
removed from private space, such as a hotel room, private banking
service space, and/or medical treatment room. This tactic represents a
sound marketing strategy to promote AI devices. Service organizations
should also train employees to tell customers (especially women) about
the opportunity to disable AI devices.
Last, findings convey that service organizations using AI devices
should attend to the design and location of such devices. Scholars have
recommended using human-like service robots to foster positive out­
comes such as customer satisfaction, purchase intention, and loyalty (e.
g., Grewal et al., 2021; Hu et al., 2021). However, this research suggests
that AI devices could have adverse effects if customers perceive these
devices as social entities that may threaten their privacy. Additionally,
this negative impact is stronger in private settings. Service organizations
should design their AI devices to have less human-like features in such
an environment.
5.3. Limitations and future research
Like any study, this research is subject to limitations. First, the sce­
narios described a customer traveling alone, yet many travelers stay in a
hotel with companions. Some customers may not perceive AI robots as a
threat (or, on the contrary, a bigger threat) to privacy when sharing a
hotel room due to the presence of other people; others may perceive AI
robots as an even greater threat in this case. Future studies could
investigate the moderating roles of party size, customers’ relationships
with their travel companions, and the nature of travel (e.g., business trip
vs. leisure trip) on the effects of AI devices. Moreover, customers’ in­
dividual characteristics, such as personal innovativeness (e.g., Jackson
et al., 2013) and previous experience (e.g., Hu, 2021), might be
important factors that affect their perceptions and behaviors toward
technological advancements such as AI devices. Future studies are
encouraged to consider these individual characteristics when examining
8
International Journal of Hospitality Management 110 (2023) 103437
AI’s effects.
Next, this research used a scenario-based experimental design with
pictures describing the appearance of AI devices. Although scenario-
based experiments are common (e.g., Choi et al., 2021; Hu et al.,
2021), research manipulation in this type of study may be over­
emphasized. A field study or/and video experiments could further
validate the proposed theoretical model. Finally, this study used the
hotel context to represent the service organization. While hospitality
organizations such as hotels and restaurants are well recognized service
organizations in prior studies (e.g., Yang et al., 2021; Yoganathan et al.,
2021), future studies should include other service organizations such as
hospitals, senior living facility, and bank to further investigate
watching-out effects.
Declaration of interest statement
None
Data Availability
Data will be made available on request.
Acknowledgment
“This research was supported by the National Social Science Fund of
China [to Yaou Hu, grant number, 22CJY045].”
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