Due to the existence of inadequate service quality management and performance studies on hotels operating in Korea, this paper aims at studying the impact of service quality on organizational performance of hotels in Korea. A total of 112 hotels were visited and a total number of 448 for both customers and employees were interviewed to accomplish the objective of the study. This study employed the concept of structure equation modeling (SEM) with all necessary prerequisites and tests were taken into consideration and presented in the results. Results indicate a strong positive influence of service quality management on the general hotel performance and similarly, a positive influence of market competition on hotel performance was evident. However, the factor covariance between service quality management and market competition found to be insignificantly explaining the relationship. Finally the paper concludes that customers' perception of service quality plays a vital important role in Korea hotel performance.