In modern market economy conditions, the hotel industry is an integral part of the tourism industry and the most important catalyst for the socio-economic development of the regions of the Russian Federation. This article investigates the essence of diversification and evaluates its role in the process of improving the competitiveness of hotel industry facilities. Generalizing various terminological approaches, diversification in hospitality industry is considered as the development of hotel industry by expanding the range of services and the possibilities of their implementation, identification of the strengths and their further development, optimization of the use of capital and all types of resources, application of new technologies, market expansion, and creation of hotel chains. Diversification as a means of enhancing the competitive advantages of a hotel is considered. The authors emphasize the fact that every hotel business should work out the most appropriate diversification strategy, based on the stated objectives. Based on the conducted research it is concluded that diversification allows hotels to ensure survival by obtaining a guaranteed level of profit, acquiring a sustainable position in the market of hotel services.