DIGITAL INNOVATION STRATEGIES AND PERFOMANCE OF FIVE STAR HOTELS IN NAIROBI CITY COUNTY, KENYA

Despite the rapid expansion of Nairobi’s hospitality sector, five-star hotels continue to experience inconsistent performance due to the slow adoption of digital innovation strategies. Many establishments still depend on traditional management systems that constrain competitiveness and profitability in an era where technology determines customer engagement and operational efficiency. The COVID-19 pandemic further exposed digital deficiencies within Kenya’s hospitality industry, including inadequate online reservation systems, limited digital customer engagement, and weak data-driven marketing capabilities. Although global research underscores the role of technological innovation in enhancing hotel performance, few empirical studies have examined how specific digital strategies influence the performance of five-star hotels in Kenya. This study examined the effect of digital innovation strategies specifically E-commerce, the Internet of Things (IoT), Artificial Intelligence (AI), and Big Data on the performance of five-star hotels in Nairobi City County. It was guided by the Innovation Management Theory, Diffusion of Innovation Theory, and the Theory on Measures of Performance. A descriptive research design was adopted, targeting 48 managers from ten five-star hotels selected through random sampling. Data were collected using structured electronic questionnaires and analyzed using descriptive statistics and multiple regression analysis in IBM SPSS. The findings revealed that digital innovation strategies collectively explained 66.2% of the variance in hotel performance (R² = 0.662, F = 16.631, p < 0.001). Big Data emerged as the strongest predictor (β = 0.763, p < 0.001), while E-commerce showed a significant negative relationship (β = -0.261, p = 0.024). IoT and AI demonstrated positive but non-significant effects due to multicollinearity. The study concludes that digital innovation particularly Big Data analytics significantly enhances hotel performance through improved decision-making, guest personalization, and operational efficiency. It recommends strategic investments in data analytics infrastructure, enhanced e-commerce systems, IoT and AI integration, and continuous staff training to sustain competitiveness.