Innovation has become a critical foundation for sustaining competitiveness across industries, and tourism is no exception. In the context of globalization, rapid technological change, shifting consumer preferences, and increasing sustainability demands, innovation is widely recognized as a key driver of competitiveness at both the destination and firm level. Building on classical theories of innovation (Schumpeter, 1934; OECD, 2005) and destination competitiveness (Crouch & Ritchie, 1999; Dwyer & Kim, 2003), this article conducts a structured qualitative review of international and Vietnamese studies to synthesize existing knowledge on the nexus between innovation and tourism competitiveness. The findings highlight four dominant categories of innovation: product, process, marketing, and organizational. Product and service innovations enrich visitor experiences and generate differentiation; process and technological innovations enhance efficiency and sustainability; marketing innovations strengthen destination branding and digital visibility; and organizational innovations improve flexibility, collaboration, and human capital development. Taken together, these forms of innovation provide multidimensional pathways for destinations and enterprises to develop and maintain long-term competitiveness in dynamic markets. This paper contributes by systematizing fragmented literature, identifying gaps, and proposing future research directions such as digital transformation, artificial intelligence applications, and sustainability-oriented innovation. From a managerial perspective, the study underscores the importance of embedding innovation into tourism development policies and business strategies to enhance long-term competitiveness.