Innovation is, alongside, skills, investment, enterprise and competition, a major driver of productivity in economy. In tourism also, it is believed that the competitiveness of enterprises to a great extent depends upon their innovation activity. Surprisingly, in tourism the research on innovation has so far received poor attention from scholars, especially in empirical research. This article aims at filling that gap. It will present results from an empirical study of innovation activity carried out during the spring/summer 2010 in the hotel sector in Croatia. Due to the problem of empirical measurement of innovation and the specific characteristics of hotel sector, the CIS IV questionnaire design was used and adapted for this purpose. CIS questionnaire has been criticized by scholars for its deficiencies in measuring innovation in services. Still, after an extensive literature and research review, it has been concluded that with the adaptations made, it is the best available tool for this purpose. The research preliminary results suggest that Croatian hotels can be portrayed as only moderately innovative and with different innovation activity according to innovation type and newness. Furthermore, parallels, where possible, are drawn to other similar research carried out in other countries (Spain and Austria) as to be able to benchmark the innovation activity of Croatian hotels. Based upon the empirical results, recommendations and guidelines for hotel practice as well as for activities of regulatory bodies are given.