Purpose: The purpose of this paper is to understand the impact service innovation has on customers’ choices within the hotel and leisure industry. The paper also discusses the influence of the creation of new services on both service development and operational strategy.Design/methodology/approach: The analysis is based on a national survey of approximately 1,000 travelers in the United States, using a web-based data acquisition approach. The travelers are segmented by reason of travel (business or leisure), and discrete choice analysis is applied to model customer preferences for various hotel service innovations.Findings: Overall, the study finds that service innovation does matter when guests are selecting a hotel, with type of lodging having the largest impact on a customer’s hotel choice. In addition, service innovation is found to have a larger influence on choices when guests are staying at economy hotels rather than mid-range to up-scale hotels. Also, leisure travelers were found to be more influenced by innovative amenities such as childcare programs and in-room kitchenettes than business travelers.Practical implications: The understanding of customers’ choices allows managers to better design their service offerings and formulate corresponding operational strategies around customer needs.Originality/value: This paper examines the addition of innovation to the hotel service concept and is an excellent tool for managers deciding on which innovations to implement.