The rapid technological advancements have profoundly reshaped service industries, particularly the hospitality sector. While offering numerous benefits, technology also introduces new complexities and risks, potentially leading to service failures and affecting customer satisfaction and organizational performance. Despite growing interest in this topic, an integrated and holistic understanding of root causes of technology-induced service encounter failure (TISEF) in hospitality remains lacking. This study addresses the gap by employing the Critical Incident Technique (CIT) with 215 Gen Z and millennial hoteliers to identify and categorize the underlying causes of TISEF. The resulting taxonomy offers a structured categorization that enhances hotelier’s ability to develop more effective solutions—both through targeted employee training and more efficient service design, whether for prevention or recovery.