Hospitality services are increasingly delivered through digitally integrated service supply chains involving hotels, technology vendors, data analytics providers, platform developers, and facility operators. As AI-enabled personalization becomes embedded within smart built environments, ethical governance of information flows across these interconnected stakeholders becomes critical for sustainable service delivery and digital supply chain resilience. The proposed model is based on developing a theoretical model about ethical personalization by using Artificial Intelligence (AI) in the luxury tourism and hospitality industry. It seeks to balance enhanced guest experience with maintaining their autonomy and privacy. A quantitative descriptive analysis method was adopted along with Structural Equation Modeling (SEM). Data was collected from 380 frequent visitors to five-star hotels in Baghdad province. The empirical evidence supported all hypotheses. The findings revealed that guest perception of AI personalization has a positive and strong effect on perceived guest knowledge autonomy. Thus, guests view AI as a means of empowerment. The most important finding is the significant mediating role of perception of mitigating competence. The findings contribute to the emerging literature on digital service supply chain governance by demonstrating how ethical AI practices and organizational risk-mitigation capabilities support sustainable stakeholder relationships within smart hospitality ecosystems.