The research investigates the application of Activity-Based Costing (ABC) in hotels, with an emphasis on the need for more accurate information compared to traditional methods. Traditional costing methods often use single rates for overhead costs, which can lead to inaccuracies in cost information, known as "cost smoothing." The ABC method, developed in the 1980s and popularized in the 1990s, provides more precise product cost information, especially when there are a larger number of products or when production processes are more complex. The main objectives of the ABC method include increased transparency, efficiency, support for strategic decision-making, and continuous process improvement. Transparency enables managers to gain better insight into actual costs and more efficient use of resources, while efficiency allows for the reduction of overhead costs and identification of factors contributing to these costs. Support for strategic decision-making helps managers make better decisions about products, prices, and costs, while continuous process improvement allows for constant enhancement of quality and cost reduction. By introducing the ABC method in hotels, managers can learn which services and segments are the most profitable and which services are used by different groups of guests. The method enables precise tracking and allocation of resource costs to activities and products, thereby increasing the accuracy of financial reports and the company's competitive advantage. This paper presents the application of the ABC method in a hotel in the Kvarner region.