This paper explores the dynamics of hotel innovation and its impact on hotel performance with a representative sample of the whole hotel sector operating in the Balearic Islands, Spain. The managers of sampled hotels (N = 331) answered questions about innovations over a 6‐year period. On the basis of an earlier developed model of innovation types, we investigate the effect on performance of different types of innovation. We find that two combinations of innovation types impact hotel performance in a positive way, namely the combinations termed, Full and Service&Back‐Office innovation. We therefore suggest that these combinations are used to create synergies for hotel performance. Copyright © 2013 John Wiley & Sons, Ltd.