In order to enhance performance, continuity and competitiveness, organizations must capitalize on opportunities and eliminate threats by applying appropriate recipes and developing various strategic approaches. Diversification is one of the powerful avenue to enhance business effectiveness and performance across the industry. Limited studies have been carried out to establish how diversification strategies influence hotel sector in Kenya. This study primarily sought to establish the effect of diversification strategies on organizational performance among star-rated hotels in the Kenyan Coast. The research was guided by four specific objectives. This study acts as an eye opener to the industry stake holders since they stand to benefit from the findings. The following theories were adopted in this study; Resource based view, Dynamic capabilities and Ansoff matrix. Mixed method research design was adopted to accommodate quantitative and qualitative data. Data was collected from 383 drowned from 42 selected star-rated hotels. Stratified random sampling technique was applied to select the hotels under study. Purposive sampling was used to select Strategic managers while random sampling technique was adopted to select both middle and lower level managers. Data was collected through questionnaire and interview schedule. Descriptive statistics and multiple linear regression was adopted to analyze quantitative data. Qualitative data was analyzed thematically.383 questionnaires were distributed where 354 dully filled representing 92.7% return rate. Additionally, 29 general managers were interviewed representing 80.6%. The research findings revealed an increasing performance among star rated hotels in the Kenyan Coast (p=≤0.000≤0.05). The regression model of related and unrelated strategies was statistically significant {F (2, 351 = 20.225, p<.000}. The regression model shows 59.8% of the variation in the adoption of related diversification strategies practice by star rated hotels in this research study (R=.773, R2= .598. Horizontal and vertical has positive influence on performance β= 425 and vertical strategies on performance β=262. The regression model shows 55.8% of the variation in the adoption of unrelated diversification strategies practiced in star-rated hotels in this study (R= .747, R2= .558). Conglomerate β= 235 and collaboration131, both having positive influence on performance. The regression model with moderator (Government policies & Regulations) on the adoption of diversification strategies by star rated hotel in the Kenyan Coast in this study (R= .785, R2=. 617. This implies that government policies and regulations are statistically important in the influence of diversification strategies among star rated hotels. Based on the findings of this study, various conclusions and recommendations were made: That the performance of star rated hotels is significantly impacted by both related and unrelated diversification strategies. Recommendations; The regulatory bodies and capital market operators must implement policies that encourage hotels to diversify their operations in order to reduce negative impacts on performance. Further study to be carried out on diversification strategies and impact on organizational performance among unclassified hotels. Contributions to new knowledge; Incorporation of moderating factors in enhancing previous linear model between diversification strategies and organizational performance.