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The purpose of this study was to investigate the mediation effect of product innovation on the relationship between social media marketing and performance of Star Rated Hotels in Kenya.  The objectives of the study were; to determine the effect of social media marketing on product innovation  and on performance of star rated hotels, to investigate the effect of product innovation on firm performance and finally to determine the mediating role of product innovation on the relationship between social media marketing and firm performance. The study employed the use of social media integration theory, Innovation Diffusion Theory and social exchange theory to test the relationship between the variables. Explanatory research design was employed and the targeted population was 215 star rated hotels listed on the Tourism Regulatory Authority. Census survey was adopted thus all the 215 rated and classified hotels on TRA were studied.  The response rate was 92.09 percent due to hotels not returning the questionnaires sent them. Regression analysis was used in testing the hypotheses. Regression results indicated that social media marketing influenced product innovation (β=0.946&gt;0.05,) and firm performance (β=0.3368&gt;0.05) respectively. Product innovation influenced firm performance (β=0.2041&gt;0.05,) and acting as a mediator product innovation showed a significant mediation effect (β=0.193&gt;0.05).  It was concluded star rated hotels can use social media marketing for performance improvement and generation and collection of information that they use for product innovation. Furthermore innovativeness of new hotel products is a better way for improving the performance of a hotel. To add on the use of social media as marketing tool has positive significant effect on firm performance in terms of customer satisfaction, market share growth and realized profits. Hotels industry needs to focus social product innovation to enhance their performance, and to obtain customer satisfaction because innovation aids in gaining a competitive advantage.

Product Innovation Mediating Effect on the Relationship Between Social Media Marketing and Performance of Star Rated Hotels in Kenya