This research aims at identifying and analizing ; (1) strength and weakness Hotel Batik Yoagyakarta also opportunity and threat of Hotel Batik Yogyakarta. (2) the business strategy formulation to increase the competitive advantange in hospitality business.

Data in this research are from secondary data, observation, and interview. The method that used to analize data in this research are three steps strategy formulation ; (1) data gathering step (EFAS and IFAS matrx), (2) matching step (TOWS and SPACE matrix), and (3) decision making step. This step use QSPM matrix.

Result, based on the three steps strategy formulation indicate : (1) EFAS and IFAS matrix shows that the Hotel are above average in the operating strategy. (2) From TOWS and SPACE matrix show three alternatives strategies (market penetration, product development, and forward integration) (3) At decision making step using QSPM matrix indicate market penetration is the attractive alternative strategy for Hotel Batik Yogyakarta to create competitive advantage.