Although the entrepreneurship strategy is demonstrated by evidence as a path to enhance the performance of service firms, the question of how it happens has yet to be adequately studied in the tourism and hospitality (T&H) realm. More specifically, how an entrepreneurial strategy enables a T&H firm to enhance its performance through service innovation exploration-exploitation ambidexterity has created a strategic dilemma in extant T&H literature. Constructed on the dynamic capabilities view and organizational ambidexterity theory, our paper addresses this dilemma using data from a drop-and-collect survey of 303 T&H firms in Japan. The findings reveal that entrepreneurial strategy fosters service innovation exploitation and service innovation exploration within T&H firms. In contrast, service innovation exploitation helps T&H firms design unique service offerings, yielding a sustained competitive advantage and superior corporate performance in the long run. Further, the availability of slack resources within T&H firms fosters service innovation exploration and service innovation exploitation.