Do New Luxury Hotel Promotions Harm Member Customers?

Abstract

Will customers regret their loyalty to a hotel and look for alternatives if the hotel neglects to communicate with them? Empirical research on this question is limited in the hospitality literature. To accurately determine the direction of future customer behavior, we investigate the impact of sales promotions on customer regret and switching intention, demonstrating that sales promotions can dilute customer loyalty. Using an experimental design study (n = 227) in Korea, our findings indicate that sales promotions have no effect on customer regret and switching intention. In particular, we find that customers’ regret of paying for a hotel membership is more salient than their regret of obtaining a free membership in the new luxury hotel context, regardless of the absence or presence of sales promotions. Moreover, the findings show that VIP club members tend to experience more regret and have greater switching intentions than free online membership customers. The higher the degree of customer regret, the more sensitive the customers’ reactions are to mixed promotions, leading to a rapid increase in switching intentions among customers. This study expands sale promotion knowledge by offering ample evidence of customer behavior and provides sustainable insights for hospitality managers responding to member customers’ demands.

1. Introduction

Owing to the substantial growth of the luxury hotel industry [1], several well-known hotel chains (e.g., InterContinental, Hyatt, Hotel Shilla, Chosun, etc.) in Korea have opened new hotels or renovated outdated facilities during COVID-19. Examining this period is important for the Korean hospitality industry, as luxury hotels have invested in strengthening competitiveness in preparation for the post-COVID-19 era. Although luxury hotel brands often increased their marketing communication for new hotel openings [2], they tended to refrain from undertaking large-scale promotions via TV home shopping programs. This may be because they did not want to dilute their strong brand equity or wanted to focus on improving customer loyalty [3].

Today, new luxury hotels actively promote their products via TV home shopping programs. However, hotel brands often neglect to communicate with their existing customers. Sales promotions are necessary to inform and encourage customers to experience new hotels and thus share positive reviews. These promotions should allow customers to experience a new hotel with at least the same benefits as their earlier experiences with the hotel brand. Otherwise, these customers may feel regret, negatively affecting their loyalty through behavior such as relationship termination or customer switching. Thus, while sales promotions are popular for obtaining customers, existing customers’ regret can dilute the effectiveness of sales promotions from a sustainability perspective [4,5]. Therefore, we examine the following research questions in this study. First, will existing customers be disappointed if they are unaware of promotional information regarding a new hotel? Second, how do existing customers respond differently to the type of sales promotion (i.e., price discounts vs. mixed promotions)? Third, does the level (i.e., low vs. high) of customer regret differ based on the sales promotion types? Finally, if customer regret varies based on sales promotions, how does this impact customer loyalty (i.e., return intention vs. switching intention)?

To answer these questions, we explore how promotions affect existing customer behavior, especially regret. First, although customers may react negatively to promotions [6], the impact of promotional levels on customer regret remains unclear. In other words, from a short-term perspective, customer behavior varies across sales promotions. However, we argue that further behavioral intentions may be a function of customer regret from a long-term perspective. Specifically, if the sales promotions for new luxury hotels proceed without considering existing customers, these customers may feel neglected, and consequently, their behavioral intentions may manifest in significant regret or switching intentions.

To advance insights, this study focuses on the moderating role of customer regret in the relationship between sales promotions and membership type. Previous studies on the impact of sales promotions either ignore or do not consider the role of customer regret. For example, when price competition is strong, customer regret can be affected by sales (or price) conditions [7]. As the failure of a hotel’s long-term growth is often attributed to who its top-priority customers are [8,9], examining the moderating role of customer regret will contribute to a complete understanding of hotels’ sales promotions. Specifically, if a hotel’s promotion increases customer regret, managers should adjust this undesirable effect based on the regret level.

Therefore, examining sales promotions and customer regret can provide critical insights into consumer behavior in the hospitality and tourism sectors. However, these insights can be attributed to differences in individual customers’ abilities to assess sales promotions before and after hospitality service experiences. They can also be attributed to the fundamental differences in the levels of customer regret and, consequently, the acceptance of sales promotions and the heterogeneity in their loyalty patterns. Thus, the current study is the first to investigate the differences in the sales promotions of new luxury hotels based on customer regret and provide insights into the relationship between regret and its impact on the heterogeneity of customer behavior patterns.

To add to the existing literature on the importance of the corporate economic sustainability of hotels [10,11], luxury hotel membership is viewed as an important variable for customer retention and, thus, the effectiveness of customer management (or loyalty). To accurately determine the direction of future customer behavior, we investigate the impact of sales promotions on regret and switching intention. This approach allows for a detailed analysis of how customers with different membership types respond to promotions regarding a newly opened luxury hotel, suggesting a deeper understanding of the sale promotion–hotel brand relationship. Using this as a starting point, we explore consumer behavior patterns in terms of the impact of sales promotions on customer regret and switching intention. Finally, we examine the implications of our findings on the hospitality literature, the sales literature, and customer management.

2. Literature Review

Defining a luxury hotel can be challenging. As a luxurious experience tends to be subjective, the term “luxury” is recognized as a symbol of excellent quality from a consumption perspective [12]. For this reason, four- and five-star hotels are often defined as luxury hotels [13]. In line with this observation, we define a luxury hotel as a five-star hotel providing a high-quality experience beyond what customers expect.

2.1. Sales Promotions

A sales promotion is a type of incentive that typically provides customers with the behavioral motivation to purchase an object. Sales promotions may include price discounts, coupons, or mixed promotions. These promotions are provided in addition to the usual benefits, such as financial and non-monetary promotions, to stimulate purchase behaviors [14]. Although price discounts are the most popular sales promotion tool [15], mixed promotions, including financial and non-monetary ones, have gained popularity in recent years [16]. Mixed promotions involve the provision of multiple benefits (e.g., a price discount plus breakfast and a great view) to facilitate sales.

Prospect theory [17] provides a plausible explanation for the variations in customer reactions to different promotional framings. According to this theory, customer perceptions regarding sales promotions depend on their subjective reference point. For example, a monetary offering would be considered a loss reduction (e.g., a decrease in the purchase price), whereas a non-monetary offering would be perceived as a gain from a purchase transaction. Mixed promotions include both these aspects (e.g., price discounts plus additional benefits); thus, customers may undertake a complicated process to evaluate these promotions. Customers offered a mixed promotion may not completely understand its overall value, making it difficult to assess its value accurately from the original service price. Thus, the promotion type determines the direction of a customer’s mental accounting [18] when they seek to accurately determine the true value of the promotion.

Our approach of utilizing two types of sales promotions is reasonable in the hospitality context, as suggested by Nunes and Park [19]. Discount promotions are typically used to emphasize the original price, encouraging customers to assess the offering relative to the price. Although mixed promotions coexist with price discounts and additional benefits, they do not provide the same discount level as price discounts. Consequently, customers may experience difficulties evaluating these two promotional framings (price discounts vs. mixed promotions) that may provide an equal promotional benefit from an integrated valuation perspective. This assumption suggests that different offerings serve as a stimulus for the behavioral motives that influence decision-making [20]. For example, the previous literature shows that when a firm offers economically equivalent promotions (e.g., 50% off, buy one get one free, or buy two and get 50% off), they mostly preferred price discounts, followed by extra products and mixed promotions [21]. In contrast, this study differs from previous studies in that it examines the frame of mixed promotions. In other words, although mixed promotions are economically equivalent to a price discount, the promotion composition may be completely different. For example, mixed promotions provide a 30% discount overall, including a 10% price discount and an additional 20% discount for breakfast and room upgrades.

2.2. Customer Regret

Regret is a negative cognitive emotion that customers strive to avoid, deny, and regulate [22]. Most studies have mainly focused on customer regret due to purchase regret [23] or post-purchase decisions [24]. These studies were based on customer satisfaction theory, indicating that a disappointing outcome causes perceived loss, resulting in regret [25]. According to this approach to assessing customer satisfaction, regret typically arises from contemplating if a different choice would have led to a better outcome [26].

While previous research explored regret in the context of post-purchase decisions, this study focuses on regrets derived from existing customers’ negative perceptions caused by strategies that do not prioritize them from a customer relationship management perspective. For example, membership marketing is popular in the hospitality sector; however, paid memberships often negatively impact customers’ behavioral intentions to try a new restaurant [27]. In particular, we focus on existing customers who purchased memberships with a variety of free and paid discount services (i.e., InterContinental’s I Choice Membership and Josun Hotels & Resorts’ CLUB JOSUN VIP). As these customers may have a high interest in a new luxury hotel, this can affect the level of customer regret if they do not have advanced preferential conditions. Additionally, we included customers with free online memberships who accumulate hotel points for additional future benefits. From limiting the use of hard-earned points to unannounced perks and broken promises, hotel loyalty programs can disappoint these customers with free memberships. Consequently, the level of customer regret may affect behavioral motives in the long run [28].

In line with these observations, we define customer regret as a negative emotional state in which a customer feels disappointed or angry when an unexpected event occurs. The customers’ feelings toward an outcome can influence their future decision-making [29]. However, customer regret is not necessarily caused by specific outcomes. Behavioral decision-making can lead to regret, specifically process regret [30]. In the context of luxury hotels, using the concept of “regret” is justifiable because it can be expressed as a guest’s regret due to feeling dissatisfied with a hotel or having a negative experience [31,32].

2.3. Customer Switching Intention

The prior literature highlighted the importance of customers’ switching behaviors when researchers examined the benefits of customer retention or the costs of switching behavior from a firm perspective. The former emphasizes the importance of revenue [33], whereas the latter focuses on the cost [34]. From a customer perspective, identifying switching behavior is critical because it relates to the end of customer relationships or the cause of customer defections. Additionally, the loss of customers has financial (e.g., decreased profitability) and non-financial (e.g., loss of market share) outcomes [35].

These losses usually appear when a failure occurs. Switching intentions cause negative outcomes for a service provider, as they indicate the possibility of a customer terminating their relationship with a provider or changing providers [36]. Thus, we define customer switching intentions as the migration tendency from one service provider to another. This definition presents a challenge to service providers regarding how to design and manage customers’ consumption experiences as switching intentions generated by certain incidents evolve [37].

We argue that a negative incident (e.g., the failure to announce promotional offers to existing customers in advance) may be perceived as a service failure in terms of core customer management, particularly in the hospitality sector, wherein core customer services are a significant determinant of service loyalty. Such failures may facilitate behavioral motives culminating in relationship termination [38]. Although these failures may be temporary, the relationship between the two parties can encourage customers to seek new service providers.

2.4. Research Hypotheses

The prior literature has emphasized the importance of existing customers when service providers implement strategies to improve performance [39], indicating that the impact of performance differs between first-time and repeat (or existing) customers in the hospitality sector [40]. These customers are typically likely to repurchase or revisit their preferred services and recommend them to their family and friends. However, a recent study demonstrated that loyal customers tend to become angry or dissatisfied when certain services are not delivered as expected [41]. This effect is known as the “boomerang effect,” which hinders customer loyalty by failing to meet the expectations of existing customers [42].

Existing customers are often highly interested in the opening of a luxury hotel and tend to form new expectations of this hotel. When new luxury hotels engage in promotions through home shopping or social network services, regardless of customer type, customers’ expectancy-disconfirmation often occurs. Consistent with the theory of psychological reactance [43], customers adjust their reactance with judgment changes and behavioral effects based on a particular event [44] and, in turn, may exhibit regret [45]. Consequently, customer reactions to sales promotions may cause regret in different ways owing to unsatisfactory service. In particular, when a customer is dissatisfied with a service, regret often facilitates switching intentions. This relationship is supported by appraisal-tendency theory, which posits that certain emotions lead to specific judgments and decision behaviors based on appraisal patterns [46]. Thus, regret can trigger customer switching intentions.

However, customers with a membership at a luxury hotel are more likely to experience regret and react negatively toward a particular event if they feel that a hotel manages its customers carelessly [27]. For example, if a home shopping channel held a massive discount event for a newly opened luxury hotel on Jeju Island, and a customer with a paid membership heard that an acquaintance without this membership had purchased the promotion, they might express disappointment that the hotel did not announce this promotion in advance. This case is consistent with prospect theory [17,47], which states that a consumer’s evaluation of an outcome relies on the reference point against which the outcome is compared. In this theory, as losses from a reference point have a greater impact than the equivalent gains [48], hotel members are likely to perceive loss and regret, resulting in switching intentions. In line with these observations, we seek to demonstrate that the lack of sales promotions for customers with memberships can trigger regret, resulting in the termination of a customer’s relationship with a luxury hotel or switching to alternative hotels. Thus, we propose the following hypotheses:

Hypothesis 1.

Customers with a membership exhibit regret toward a luxury hotel when the hotel does not directly offer sales promotions.

Hypothesis 2.

Customers with a membership switch to alternative luxury hotels when a particular hotel does not directly offer sales promotions.

Customer regrets are examined in a given purchase situation by comparing the results of chosen and non-chosen purchases [49]. For example, if the difference between price discounts and mixed promotions is significant, it can lead to regret. However, if these promotions are equal, customers’ feelings of regret may depend on the different promotional levels. Generally, first-time or infrequent customers are likely to have a high price consciousness [50], whereas repeat or existing customers are familiar with service prices, indicating they are willing to pay a premium. In particular, infrequent customers have a strong tendency to avoid uncertainty through price discounts rather than other promotional types [51]; this tendency is consistent with prospect theory [17].

In situations that involve moderately different sales promotions (or levels), customers may develop discount expectations based on their prior experiences. In particular, customers with various hospitality experiences may respond less sensitively to price discounts [52], indicating that customer regret is based on different promotion levels. Prior studies have also significantly supported that promotional proneness is a crucial motivator of mixed promotion redemption for frequent shoppers [53]. Such customers often evaluate that price discounts reduce the value of a deal [7] since repeat (or membership) customers prefer services that differentiate them from other customers and provide value that encourages frequent revisiting [54]. In line with these observations, we sought to demonstrate that if a luxury hotel offers price discounts, customers with a membership may experience negative emotions, resulting in regret. In contrast, customers have positive emotions if the hotel offers mixed promotions, resulting in non-switching to other alternatives. This is because customers make optimal decisions given their rational expectations regarding future prices, i.e., for subsequent hotel visits. Thus, we propose the following hypotheses:

Hypothesis 3.

Customers with a membership exhibit regret toward a luxury hotel brand when the hotel directly offers price discounts rather than mixed promotions.

Hypothesis 4.

Customers with a membership do not switch from a luxury hotel brand when the hotel directly offers mixed promotions rather than price discounts.

3. Methodology

3.1. Study Design

The experiment used a 2 (membership: paid club vs. online membership) × 2 (promotions: present vs. absent) as well as a 2 (membership: paid club membership vs. online membership) × 2 (sales promotion type: price discounts vs. mixed promotions) mixed design. The promotional stimuli were presented as the presence or absence of promotions offered by a luxury hotel brand. The experiment design implied that any difference in promotions could be attributed to the presence or absence of promotions or the overall level of different promotions.

The participants were assigned to one of two membership types (paid club vs. online free membership). We informed the participants in advance that the paid membership is the premium class membership of a particular hotel (USD 80 per year), including concierge services, free room passes, valet parking, 30% discount at hotel restaurants, etc., but online free memberships only earn points. We assigned paid club memberships to current members or those who had previously purchased a hotel membership. In contrast, those without purchase experience were assigned to a free online membership group. However, as the conditions for paid memberships differ for each luxury hotel, we limited our study to paid and online membership conditions for a particular hotel brand. Then, we thoroughly explained the membership benefits to the participants assigned to each membership type. Before beginning the full-scale online survey, we asked the two respondent groups (paid club vs. free online membership) to read the following scenario:

“Assume that you have a paid membership (or free online membership) for a luxury hotel group. You and your family are planning a three-day holiday to Jeju Island, Korea. While watching a home shopping program on TV, you discover that the hotel group for which you have a membership is opening a new hotel on Jeju Island. The hotel’s sophisticated design looks comfortable, convenient, and hygienic. The hotel offers Korean, Western, and Asian-fusion cuisines in premiere restaurants with deluxe ocean views. This new luxury hotel looks attractive and seems to offer a modern service touch for its guests. Therefore, you expect the hotel group to give you direct sales promotions, but unfortunately, they did not offer any promotions at the time of booking. The luxury hotel often announces promotions in advance; thus, the above case causes you to feel regret”.

After reading the above scenario, the respondents were asked to indicate their level of regret toward their hotel membership and express their intention to switch to alternative hotels in the future. Next, we randomly assigned all participants to the promotion-present or promotion-absent groups. We explained the conditions of the different sales promotion types to the participants. There were two main types of promotions for the new luxury hotel: price discounts and mixed promotions. The price discount provided consumers with a 30% discount off the regular price. As noted earlier, the mixed promotions provided a 30% financial discount as well; however, the terms of use differed from the price discount. Specifically, customers were offered a 10% price discount with an additional 20% discount for breakfast and room upgrades. Finally, the promotion-present group was given complete information about the hotel promotion, while the other group was exposed to only limited information.

3.2. Participants

The respondents for this study were recruited in February 2022 using an online research firm. These individuals were invited to participate in a study on using luxury hotels (five-star hotels). As a screening criterion for selecting a sample suitable for this study, we limited the participants to current members, those who have purchased luxury hotel paid memberships in the past, or those with free online memberships. As mentioned above, we compensated for the disadvantages of random sampling by using stratified sampling based on the sample framework.

Examples of luxury hotel chains (e.g., Park Hyatt, Chosun, and JW Marriott) were provided to the respondents at the beginning of the survey. These chains have recently opened luxury hotels on Jeju Island. A total of 227 usable responses were collected from the survey (N = 112 for the promotion-present condition and N = 115 for the promotion-absent condition). Among the participants, 119 were female (52.3%), 211 had a college education or higher (92.8%), and the majority were 28–49 years of age (82.7%).

Finally, we investigated whether a sample size of 227 was appropriate. Researchers have recently recommended determining the sample size using bootstrap methods [55]. To this end, when the intra-class correlation coefficient (ICC) was 0.1 (repetitions per subject = 3), the bootstrap methods to achieve 70% power required a minimum sample size of 225. Thus, we concluded that our sample size met the minimum requirement.

3.3. Measures

We measured the participants’ regret using two items adapted from Zeelengerg and Pieters’ [22] and Jang et al.’s [27] studies as follows: “How much regret did you experience after this promotion,” and “I experienced regret toward promotions that did not consider customers with membership.” These items were measured on a five-point scale ranging from not at all (1) to very much (5) (Cronbach’s α = 0.83). To measure the switching intention, we utilized a single item with a five-point scale [56] on which the respondents indicated the probability that they would switch to alternative hotels for future holidays (1 = I will definitely book alternative hotels for my holidays; 5 = I will definitely plan to spend my holidays at this hotel). The use of a single measure for switching intention has been recommended in previous consumer behavior studies [57]. In terms of mixed promotions, the respondents were allowed to choose between two conditions: a 30% price discount vs. a 10% price discount with an additional 20% discount on breakfast and room upgrades.

Furthermore, we checked the manipulation for the scenario’s efficacy using a five-point scale (1 = strongly disagree; 5 = strongly agree). We used the following statement for the sales promotions: “The hotel brand in these scenarios is likely to provide sales promotions to inform customers of their new luxury hotel”. For realism, we also used the following statement: “The situation described in this scenario seems realistic” [6].

4. Results

4.1. Customers’ Regret Regarding the New Luxury Hotel

We performed a manipulation check to ensure the efficacy of the proposed scenario. The respondents perceived the scenario as realistic, with an average rating of 4.21 on a five-point scale. There was no significant difference in the scenario efficacy between the promotion-present and promotion-absent groups (M = 3.89 for the promotion-present group vs. M = 3.82 for the promotion-absent group, t = 1.57, p = 0.16). Regarding the promotion manipulation check, the promotion-present group rated significantly higher (M = 4.07) than the promotion-absent group (M = 2.26, p < 0.01). In line with these observations, we concluded that our manipulations were effective.

To test the two hypotheses (H1 and H3) on customer regret, we conducted a moderated regression analysis using the PROCESS macro (M = 1) [58]. The promotion was dummy coded as promotion-present = 1 and promotion-absent = 0. As not all studies test one moderator, Hayes [58] recommended using PROCESS macro in the conditional process of regression analysis. Specifically, he emphasized the importance of estimating and inferring these characteristics in conditional process models with multiple moderators. Additionally, because the PROCESS macro produces conditional indirect effects through graphics, it has the advantage of being able to easily understand the results of moderating effects [59].

Membership type was dichotomously coded as online free = 1 and VIP club = 2. As shown in

Table 1. Regression results for customer regret.

	Coefficient (t-Value)	LLCI/ULCI
Membership type	0.28 (2.08 *)	0.0692/2.4366
Promotional offer	0.30 (1.99 *)	0.0184/2.6230
Membership type × Promotional offer (H1)	−0.12 (−0.07, ns)	−1.1443/0.3343
Membership type	−0.13 (−1.55, ns)	−3.6944/0.4343
Promotional offer	−0.18 (−1.88 *)	−3.5565/−0.2355
Membership type × Promotional offer (H3)	0.26 (2.29 *)	0.1796/2.3554

Note: *, p < 0.05; **, p < 0.01. ns = not significant.

, the effect of promotional offers based on membership type was significant (b = 0.30, t = 1.99, p < 0.05). Additionally, membership type had a significant direct effect on customer regret (b = 0.28, t = 2.08, p < 0.05). However, the two-way interaction between membership type and promotion offers was not significant. Figure 1 provides ample evidence regarding promotional offers to better understand the H1 results. More specifically, the higher the number of VIP club members, the greater the level of customer regret experienced when sales promotions are not presented. While there was a distinct difference between the two groups, there was no interaction between promotional offers and membership groups in their relationships with customer regret. Thus, H1 was not supported.

In H3, we posited that customers with memberships experience regret toward a luxury hotel brand when they are directly offered price discounts rather than mixed promotions. As shown in Table 1, promotion type based on membership type significantly affected customer regret (b = −0.18, t = 1.88, p < 0.05), while membership did not have a significant direct effect on customer regret (b = −0.13, t = −1.55, p > 0.05). However, the two-way interaction between membership type and promotion type was significant (b = 0.26, t = 2.29, p < 0.05). In particular, the direction of this interaction effect was consistent with H3. As shown in Figure 2, when VIP club members received price discounts, customer regret gradually rose. In contrast, customers with free online membership demonstrated a higher level of customer regret when receiving mixed promotions. Thus, H3 was supported.

4.2. Customers’ Intentions to Switch to Alternative Hotels

H2 and H4 were similarly tested using the PROCESS macro (M = 1); however, in this case, the dependent variable was switching intention. As shown in

Table 2. Regression results for switching intention.

	Coefficient (t-Value)	LLCI/ULCI
Membership type	0.25 (3.02 **)	0.5827/2.7534
Promotional offer	0.19 (1.92 *)	0.0432/2.3490
Membership type × Promotional offer (H2)	−0.12 (−1.64, ns)	−1.2405/0.1152
Membership type	−0.35 (−3.84 **)	−2.6024/−0.9316
Promotional offer	−0.08 (−1.13, ns)	−1.8957/1.2888
Membership type × Promotional offer (H4)	0.20 (1.98 *)	0.5265/2.4481

Note: *, p < 0.05; **, p < 0.01. ns = not significant.

, promotional offers based on membership type significantly impacted the switching intention (b = 0.19, t = 1.92, p < 0.05). Additionally, the direct effect of membership type on switching intention was significant (b = 0.25, t = 3.02, p < 0.01). However, the two-way interaction between membership type and promotional offers was not significant. To better understand H2’s results, Figure 3 presents ample evidence of promotional offers. Specifically, the higher the number of VIP club members, the greater their switching intention when the hotel brand did not present sales promotions. Although these findings were interesting, there was no interaction between promotion type and membership group in their relationship with customer regret. Thus, H2 was not supported.

Regarding H4, we posited that customers with memberships do not switch luxury hotel brands when presented with mixed promotions rather than price discounts. As shown in Table 2, promotion type based on membership type did not significantly affect switching intention (b = −0.08, t = 1.13, p > 0.05), while membership type had a significant direct effect on it (b = −0.35, t = −3.84, p < 0.01). However, there was a significant two-way interaction between membership type and promotion type in their relationships with switching intention (b = 0.20, t = 1.98, p < 0.05). Although the direct effect of promotion type on switching intention was insignificant, the interaction effect between the two constructs was significant as shown in Figure 4. Thus, H4 was supported.

Meanwhile, when VIP club members were presented with mixed promotions, they exhibited lower switching intentions than when presented with price discounts. Similarly, customers with free online memberships demonstrated higher switching intentions when presented with price discounts rather than mixed promotions. Thus, we found that the members of the two groups did not tend to exhibit high switching intentions when presented with mixed promotions.

5. Discussion

5.1. Summary of Key Findings

During the COVID-19 pandemic, many businesses in the hospitality sector began conducting flash sales (or daily deals) to effectively boost overall sales and improve performance. Although this approach can improve sales volume and increase profits in the short term, the results of the current study show that sales promotions significantly affect customer regret and switching intention. Similar to our findings, researchers [60,61] demonstrated that sales promotions implemented within a limited time often affect customer regret or negative behavioral intentions. Additionally, customer regret and switching intention depend on promotion types [62] and whether luxury hotels present membership customers with promotional offers in advance [63].

We examined the interaction effects between membership type and the presence of promotional offers and between membership type and promotion type in their respective impacts on customer regret (or switching intention). We observed similarities and differences in the interaction results. Specifically, the presence or absence of hotel promotions did not have a significant interaction effect on the membership type for either customer regret or switching intention. However, promotion type significantly interacted with membership type for both customer regret and switching intention. Regarding the presence or absence of hotel promotions, Yang et al. [6] found that customers’ return intentions were higher when they perceived the absence of a price promotion. However, the current study’s findings indicate that customer regret and switching intention have no significant relationship with the presence or absence of hotel promotions, regardless of customer membership type.

Despite the extensive research on customer regret, hospitality researchers have mainly focused on the impact of restaurant patrons’ regret on dissatisfaction and behavioral intentions [64]. These studies demonstrated that customer regret is an important predictor of switching intention. Although the current study did not establish a formal hypothesis for this aspect, we conducted additional analyses to expand the results of previous studies. We found that customer regret had a significant direct effect on membership type (b = 0.31, t = 4.79, p < 0.01). Additionally, the interaction effect between customer regret and switching intention was significant (b = −0.35, t = −2.21, p < 0.05). While our additional results are consistent with the findings of previous studies, the observed interaction effect is quite interesting. As shown in Figure 5, the greater the level of customer regret, the higher the switching intention. In particular, when customer regret is low, their switching intention remains extremely low regardless of the promotion type but increases significantly when mixed promotions are presented, and customer regret is high.

However, these additional analysis findings somewhat differ from our formal hypothetical results. Our findings regarding membership type show that price discounts have a greater effect on customer regret and switching intention than mixed promotions. If membership types are not considered, and customer regret is high, mixed promotions reinforce the switching intention of customers more significantly than price discounts. Thus, sales promotions can trigger negative emotions in customers, and ultimately, their regret reinforces their switching intentions. While the latter mechanism (emotion–behavior) has been well theorized [64,65], the role of sales promotions in the proposed relationship, as examined in the current study, contributes to the hospitality literature.

5.2. Theoretical Implications

This study’s findings contribute to the literature on sales promotions and customer regret in several ways. First, previous studies have shown that the absence of sales promotions negatively affects consumers’ attitudes toward a hotel and their return intentions [6]. In contrast, our findings demonstrate that the presence of sales promotions does not affect customer regret or switching intention. For example, Bagozzi’s [66] appraisal–emotional response–coping framework suggests that evaluating whether sales promotions are presented leads to an emotional response (e.g., customer regret), which triggers switching intentions. Contrary to this coping framework, our results show that the appraisal of sales promotions is not sequentially linked to customer regret and switching intentions.

Second, this study identified hotel membership type as a critical factor when different promotion types are involved in the proposed relationship. Previous studies have shown that high membership fees in the hospitality sector failed to create strong switching barriers compared to low membership fees [27]. Consistent with previous studies, our findings demonstrated that VIP club members experience more regret and switching intentions than customers with free online memberships. However, these results depend on various boundary conditions. In particular, the above effect is greater when customers are presented with price discounts rather than mixed promotions, indicating that VIP club members react more negatively and sensitively to price discounts. Thus, this study investigates the impact of promotion types in marketing mixes to predict regret and behavioral intention regarding customer membership types in the customer–hotel relationship.

Finally, the prior literature indicates that a firm’s positive performance can be attributed to the possibility that consumers, especially recurring ones, utilize promotional offers [67]. While these studies focused on customer reactions to scarce offers regarding sales promotions, in the current study, customers’ emotions and behaviors were found to be independent of the presence or absence of sales promotions. Specifically, regardless of whether sales promotions were presented, the results show that customer regret increased as the membership type moved from a free membership to a paid membership. While previous studies have only focused on customers’ tendency to accept promotional offers [68], our findings demonstrate that customer regret is more salient for those with paid memberships than with free memberships in the new luxury hotel context.

5.3. Practical Implications

The findings of this study are relevant to a wide variety of services in the hospitality sector. First, the findings can improve managers’ ability to capture the outcomes of sales promotions and the differences in hotel membership types. Additionally, the results suggest that managers can enhance customers’ responses to sales promotions if customers are presented with an optimal mix of promotional offers. This will lower the level of regret and strengthen customer switching barriers. For example, when a new luxury hotel is opened, it is desirable to notify member customers of the mixed promotional offers in advance as it can stimulate their self-esteem and encourage purchases. Managers can display sales options as a unique set of mixed promotions (with well-designed text and photos) to encourage customers to make comparisons. Furthermore, if these strategies are linked to the relationship between customer-based brand equity and sustainable performance [69,70,71], our approach can enhance both economic and non-economic performance.

Second, this study highlights the importance of customer management in presenting promotions based on the level of customer regret. Managers can implement various after-sales services to reduce this regret [7]. They should understand that customer regret, derived from the absence of advance promotions, will have a much stronger effect on VIP membership customers who may experience negative emotions toward a certain promotion. Thus, managers should seek to reduce the level of regret following the absence of promotions. For example, in addition to promotions published on the official hotel website or in online articles, VIP club members should be given priority to special promotions. For example, hotel members were notified in advance of the “Strawberry Gourmet Boutique” event at the lounge and bar of the InterContinental Hotel in Seoul. This promotion was well-received, resulting in surprising word-of-mouth and the increased attention of hotel industry officials.

5.4. Limitations and Directions for Future Research

This study’s findings provide robust evidence of the proposed relationships underlying customer regret and switching intention. However, there are some limitations that must be addressed in future studies. First, while the current study provides strong evidence regarding the impact of sales promotions on customer regret and switching intention, it offers little guidance on effectively addressing the differences between free online memberships and VIP club memberships. Further research into these well-identified membership types is likely worthwhile in terms of providing more valuable practical recommendations.

Second, the study’s sample size is relatively small. Researchers may find it interesting to extend this research regarding the effectiveness of sales promotions via a generalization process as customer regret and switching intention may present different results for a large sample size. Additionally, while we did not propose a formal hypothesis on the moderating role of sales promotion in the relationship between customer regret and switching intention, our results suggest that when customer regret is low, switching intention tends to be minimal. In other words, we demonstrated that all customers could potentially exhibit switching intentions regardless of the sales promotion type. Thus, future studies must investigate how customers’ switching intentions are affected by sales promotions and how the level of customer regret affects this proposed relationship.

6. Conclusions

This study examined the impact of sales promotions on customer regret and switching intention during the COVID-19 pandemic. Specifically, we explored consumer behavior patterns in terms of the impact of sales promotions. Our findings show that these promotions significantly affected customer regret and switching intention. Interestingly, the presence or absence of hotel promotions did not have a significant interaction effect on the membership type for either customer regret or switching intention. However, promotion type significantly interacted with membership type for both customer regret and switching intention. Additionally, customer regret and switching intention depend on the promotion type and whether luxury hotels present membership customers with promotional offers in advance. Consequently, our findings suggest that managers can enhance customers’ responses to sales promotions if an optimal mix of promotional offers is presented. Furthermore, managers should seek to reduce the level of regret following the absence of promotions. Thus, this study upgrades the consumer response to sales promotions and provides new insights into existing customer regret and switching intention paradigms during the COVID-19 pandemic.