Strategizing in Response to Environmental Uncertainty in the Hospitality Industry: A Data-Analytical Approach

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Virginia Tech


The hospitality industry confronts continuous challenges from external environments, such as the COVID pandemic, the proliferation of short-term rentals, and the disruptive innovations of Generative AI. For businesses, understanding these external conditions and adapting strategies accordingly is crucial yet challenging, especially considering environmental uncertainties. Therefore, this dissertation investigates the effectiveness of different strategies in navigating market, competitive, and technological uncertainties, through a big-data analytical approach. It incorporates three studies, each focusing on one specific strategy and its varying outcomes under environmental changes. These studies employ machine learning algorithms to quantify strategies and utilize econometric models to infer the causal relationships between strategies and their outcomes. The first study examines how standardization affects short-term rental unit survival across two market conditions: pre-COVID growth and during-COVID decline. The results indicate that the risks arising from standardization are heightened under market decline. In addition, the effectiveness of standardization varies with design attributes to which the strategy is applied. Standardizing functional design boosts unit survival in the growing market but leads to a higher failure rate during the decline. Aesthetic standardization, on the other hand, negatively impacts survival in both conditions, with a stronger effect in the declining market. The second study identifies the impacts of differentiation on unit performance in the short-term rental context in two competitive environments: local versus city-level. The findings suggest that the effectiveness of differentiation increases with competitive pressure. At the local level where firms face localized competition, differentiation enhances unit performance. Conversely, in city-level environments where direct competition diminishes, it yields negative outcomes. Moreover, competition intensity, as reflected by the number of competitors and the degree of market concentration, is found to amplify the benefits of and mitigate the drawbacks of differentiation. The third study explores if adopting Generative AI to hotel online review response can improve customer feedback, under varying technological settings. It finds that simulated AI adoption improves customer perceptions when Generative AI models operate at high temperatures, while models with low temperatures lead to negative outcomes. The findings further underscore the importance of task-technology fit, revealing that Generative AI's effectiveness varies with review valence. Specifically, high-temperature settings for positive reviews generate significant benefits, whereas low-temperature settings lead to adverse effects. Conversely, for negative reviews, AI adoption demonstrates more stable outcomes across temperature settings, indicating balanced benefits of both low and high temperatures. In short, this dissertation identifies that the effectiveness of standardization, differentiation, and AI adoption strategies is contingent on environmental conditions. It underscores the importance of strategic adaptation in navigating contemporary challenges.



Environmental uncertainty, Strategic adaptation, Standardization, Differentiation, AI adoption, Hotel management, Short-term rental, Big data analytics, Machine learning