This study assesses the effect of employees' absorptive capacity including knowledge acquisition, knowledge assimilation, and knowledge exploitation on the innovation performance within the specific context of Egyptian travel agencies. The study utilizes a deductive approach and employs quantitative methods, particularly structural equation modeling (SEM), for the purpose of data analysis. A semi-structured questionnaire is administered to a sample of 278 travel agencies from 1008 Egyptian travel agencies class A, and the findings of the study reveal significant insights. Firstly, the study found that knowledge acquisition by employees has a considerably positive influence on innovation performance, thereby confirming the first hypothesis (h1). This highlights the significance of investing in training, education, and mechanisms that facilitate the sharing of knowledge in order to enhance innovation within Egyptian travel agencies. Secondly, the study demonstrated that the assimilation of knowledge has a moderately positive effect on innovation performance, thereby supporting the second hypothesis. This result emphasizes the importance of not only acquiring knowledge, but also effectively integrating and utilizing it within the organizational framework. Thirdly, the study establishes that knowledge exploitation has a substantial positive impact on innovation performance, thus providing corroboration for the third hypothesis. This finding underscores the importance of effectively leveraging existing knowledge and resources in order to stimulate innovation performance within Egyptian travel agencies. The study findings encompass practical recommendations for travel agency managers to enhance both absorptive capacity and innovation performance. These recommendations include fostering a culture of learning, promoting the sharing of knowledge, ensuring access to external information, embracing diversity within teams, supporting initiatives aimed at innovation, establishing feedback mechanisms, and measuring and evaluating performance. Additionally, the study suggests exploring contextual factors, conducting cross-industry comparisons, and investigating the role of technology, leadership, and customer-centric approaches in influencing absorptive capacity and innovation within the Egyptian travel agency sector. This research contributes to a deeper understanding of how knowledge management can drive innovation within the travel industry, and it provides valuable insights for both academia and industry practitioners.