This study provides a new perspective on the effect of social media use in SMEs. The purpose of this paper is to investigate the influence of social media on firm performance with mediating role of marketing capabilities in the UK, hotel industry. In this research, a structural equation modelling method has been employed for data analysis. The survey data has been collected by mail survey from a sample of 384 hotels in the UK. Results from the data analysis demonstrate the positive and significant relationship between social media use and firm performance. However, the findings highlighted that marketing capabilities, namely branding and innovation, positively and significantly mediate the association between social media use and firm performance.