•A new framework to measure the impact of CRM dimensions of firm performance.•CRM capabilities improve hotel performance, while CRM investments did not result in positive performance.•Size has an important moderating effect between some of the CRM dimensions and hotel performance. Successful firms often endeavour to assure competitive advantages through the relationships with their customers. Consequently, customer relationship management (CRM) has become of pivotal importance to many firms. This study investigates the effect of each CRM dimension on the performance of hotels. We found that in general hotels should aim to improve CRM capabilities because it has a positive effect on firm performance. Contrary to some previous assumptions, CRM investments did not result in positive performance. These findings are important as hotels strive to allocate resources to improve relationships with customers.