Introducing robot or not? Decisions of competing hotels

Abstract

In recent years, robot services are prevalent in the hotel industry. Hotels face the practical challenge of deciding whether or not providing robot services. To cater to this challenge, we consider two competing hotels, and develop four theoretical models to explore their optimal robot adoption decisions. First, we utilize the Hotelling game to portray the utility functions of different types of consumers for two different quality hotels, and based on this, we derive the consumer demand function as well as the profit function of the hotels. Subsequently, we present the optimal decisions under different strategies. Finally, by comparatively analyzing the optimal profits, we obtain the optimal robot introduction strategy for hotels. The results show that the optimal robot introduction strategy depends on three factors: the utility that robots bring to both technology-embracing and technology-averse consumers, the labor cost saved by providing robots, and the robot purchase cost. Interestingly, compared to the two competing hotels that have not introduced robots, when both of them introduce robots, they fall into a “prisoner’s dilemma”. Besides, when both competing parties introduce robots, the profits of both parties tend to decline compared to those in the case that only one party introduces robots. At last, we consider two extended models, and we find that the main conclusions of the extended models are consistent with the basic model, which validates the robustness of the main results.