Introduction Digital transformation offers significant potential for building effective and sustainable societies by enabling radical changes in services aimed at various stakeholders (Abdelaziz & Naama, 2023). This has allowed hoteliers to seek new competitive advantages by using these technologies. Many see this as “digital transformation”, a process that aims to improve an asset by triggering significant changes through the combination of information, computing, communication and connectivity technologies. The increasing accessibility and use of digital technologies has increased the challenges for hoteliers. The search for the most appropriate strategy for investing in new systems and technologies in the digital age has become a critical issue for the sector (Wynn & Jones, 2022; Vial, 2021) Problem Statement As digitalization rapidly spreads across the industry and society, hotel companies face a variety of challenges in developing and implementing their IT strategies. (Wynn & Jones, 2022). The acceleration of digital transformation supports the resilience and sustainable development of the hospitality industry. However, although digital transformation holds great potential, many companies face significant challenges during implementation. This challenge is especially prevalent in small and medium-sized businesses, which often face limitations in terms of their level of digitalization and resources. (Ka et al, 2023). Small and medium-sized enterprise (SME) hotels in Turkiye face significant challenges related to digital transformation in order to remain competitive in the dynamic hospitality sector. This study aims to uncover the digitalization problems specific to SME hotels operating in Turkiye, identify and categorize the primary challenges faced by SME hotel managers. This study also intends to analyze the frequency and emphasis of these challenges through thematic analysis and offer theoretical and practical contributions to improve problem-solving in the hospitality industry. Methodology and Analysis This study adopts a qualitative research approach to explore the challenges faced by hotel managers. The research design is grounded in thematic analysis, a method widely used for identifying, analyzing and interpreting patterns of meaning within qualitative data. The data were gathered through semi-structured interviews with 17 SME hotel managers across the country. Python was used for data analysis and visualization due to its robust capabilities in handling qualitative data. Findings The results reveal that SME hotels encounter a range of challenges including technological barriers, dependency on online travel agencies (OTAs), limitations in staff skills and resistance to change, difficulties in digital marketing, operational inefficiencies, budget constraints, data privacy and security concerns and issues related to guest personalization. Theoretical Contributions This study contributes to the field of hospitality management by employing a systematic approach to qualitative data analysis, leveraging Python for thematic exploration and visualization. It addresses gaps in the existing literature by identifying critical challenges faced by SME hotels. Practical Contributions This study offers a comprehensive exploration of the challenges associated with digital transformation in SME hotels, providing an in-depth understanding of hotel managers’ experiences and perceptions. By identifying key barriers, the study enhances understanding of the practical obstacles to digitalization within the hospitality industry. ACKNOWLEDGEMENTThis study is supported by REMODEL project which is funded by the European Union’s Horizon Europe research and innovation program under grant agreement No 101079203. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the European Research Executive Agency (REA). Neither the European Union nor the granting authority can be held responsible for them.REFERENCESAbdelaziz, M., & Naama, A. (2023). The Impact of Digital Transformation Dimensions on the Employees Job Performance: Applying on Four and Five Star Hotels in the Red Sea Governorate. Journal of Association of Arab Universities for Tourism and Hospitality, 24(1), 436-466.Ka, X., Ying, T., & Tang, J. (2023). A Conceptual Model for Developing Digital Maturity in Hospitality Micro and Small Enterprises. Journal of Theoretical and Applied Electronic Commerce Research, 18(3), 1511-1528.Vial, G. (2021). Understanding digital transformation: A review and a research agenda. Managing digital transformation, 13-66Wynn, M., & Jones, P. (2022). IT strategy in the hotel industry in the digital era. Sustainability, 14(17), 10705.