The role of service quality in the success of hotel businesses cannot be denied, the service qualityrnasserted by the Addis Ababa hotel need to be studied. It is vital for the hotel directors and ownersrnto have a good understanding on what precisely the customers desire. Identifying the dimensionsrnof the service quality, and their relative importance for customers for three and four star categoryrnof hotel industry would definitely help managers in improving the service quality. The mainrnobjective of this research is to evaluate the effect of service quality on customer satisfaction ofrnthree and four star hotels in Addis Ababa by applying a modified SERVQUAL model calledrnHOLSERV from the point of the three service quality dimension (employee behavior andrnappearance, tangibility and reliability) of the service delivered by the three and four star hotelsrnin Addis Ababa. To achieve this objective, quantitative research design and causal researchrnapproach were used to analyze the data collected through a structured questionnaire from arnsample of 384 hotel guests. These respondents were selected using non-probability conveniencernsimple method and hotels were selected purposefully. The data collected through a questionnairernwere analyzed using statistical tools such as mean, standard deviation, correlation andrnregression analysis via SPSS Version 20. The major finding of the study indicates, the employeernbehavior and appearance dimension can highly affect customer satisfaction, followed byrnreliability and tangibility. Based on the findings of the study, the researcher recommended thatrnthe owners or top management to improve quality services so as to satisfy customerâ€™s needsrnshould hire professional, self-motivated, passionate employees who are capable to deal withrncustomer and solve customer complaints and other issues in an effective manner, besides thisrncontinuous training should be provided. The study only addressed twelve three and four starrnrated hotels, which found in Addis Ababa this limits the generalizability of the study