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Purpose: This study investigates the challenges of integrating AI ethics to enhance employee happiness in high-interaction tourism workplaces, where emotional labor and continuous guest engagement increase stress and affect performance. Design/methodology/approach: The study employed a mixed-methods approach, combining manager interviews with surveys of 558 employees and 130 managers. Using SmartPLS 4.1.1.4 for non-normal data and complex mediation, the research is primarily confirmatory while also exploring underexamined intersections of ethical AI and employee happiness in tourism. Findings: Results show ethical AI impacts employee well-being (R² = 0.640) more than managers’ (R² = 0.414). Technostress reduction supports employees’ cultural integration, while transparency and fairness enhance managers’ empowerment. Data privacy shapes employee HCDH perceptions, indicating role-specific priorities and ethical AI’s potential to boost happiness in service contexts. Originality/value: This study provides empirical evidence that ethical AI fosters employee well-being in tourism and hospitality. Offering a replicable framework for other sectors and regions, it links human-centered AI with Human Capital Development, contributing to theory and practice while guiding the creation of employee-focused, ethically responsible AI strategies in service-intensive workplaces.
