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The purpose of this study is to explore the effect of customer relationship marketing on customer retention in four star Hotels of Bahir Dar city. These hotels are not able to retain their customers who frequently visit Bahir Dar for different purposes. This is due to the improper provision of services which resulted from lack of skill and knowledge of entertainment. To enable these hotels use CRM technology to retain their customers, the study considered dimensions of relationship marketing such as, communication, service quality and trust to measure customer retention. The research used explanatory research design and cross sectional study. Validity and reliability test was used to check the consistency and dependability of the instruments and accordingly, all the components of relationship marketing considered under the study were also proven their reliability. Convenience sampling was applied for the selection of customers of the hotels.