Expanding artificial intelligence (AI) technologies has impacted how hotels engage with their guests. Hotels have transformed their operations through personalization strategies aimed at improving guest satisfaction and cultivating customer loyalty. Within this scope, this study aims to explore personalization phenomena through the prism of artificial intelligence and loyalty programs in hotels in the city of Yazd and to define the operational and cognitive dimensions of this phenomena via hotel managers and industry experts. Using Braun and Clarke’s six-step framework to develop themes, this study is classified as applied and has a qualitative research design. For this purpose, 15 managers and experts of four and five-star hotels in Yazd were purposefully selected, and through in-depth, semi-structured interviews, data were collected until theoretical saturation was achieved. The results provided insights into 15 themes that fit into 3 areas that describe the operational potential of AI in customizing loyalty programs (such as predicting customer preferences, customer feedback sentiment analysis, and reward optimization), outcomes (e.g., customer satisfaction, attitudinal loyalty, and loyalty such as repurchasing and recommending the brand), and the barriers and challenges of implementation (e.g., apprehensions around data, resistance due to the culture, unavailability of technology, and lack of funds). Participants perceived that the effective application of AI capabilities was likely to improve the experience and satisfaction of customers and form the basis of attitudinal loyalty and foster behavioral loyalty, such as repurchase and brand advocacy. This study, via a qualitative conceptual model, contributes to hotel managers in the construction and operationalization of smart loyalty programs within the context of the culture and history of Yazd.