China Tourism Price Wars and Weak Demand Hit Hotel Revenues

China's domestic tourism sector, once a promising area for consumer spending, is currently experiencing a significant downturn driven by fierce price competition and weakening consumer demand. This trend has led to a notable decline in hotel revenues, intensifying profitability pressures across the industry.

International hotel chains reported year-on-year decreases in Revenue Per Available Room (RevPAR) and Average Daily Rate (ADR) for their China operations in the second quarter of 2024. Wyndham saw a 17% drop in RevPAR, IHG a 7% decline, while Hilton, Marriott, and Hyatt experienced reductions ranging from 3% to 5%. The average revenue per room fell by 9.7% year-on-year to RMB 118 in 2024, with ADR dropping by 5.8%. While occupancy rates are recovering to near pre-pandemic levels (around 65-70% in 2024), revenue growth has stagnated, indicating a diminished pricing power for hotels. The opening of over 23,000 new hotels in the first half of 2024, surpassing pre-pandemic expansion, has contributed to market saturation and discount-driven competition, particularly among midscale brands. Beijing's hotel industry reported a 7.3% year-on-year fall in operating revenue and a staggering 92.9% plunge in total profit during the first half of 2025.

The reduction in both the volume and expense of business travel has posed significant challenges, especially for high-end international hotel chains. Consumers have become more price-sensitive, engaging in “rational spending” and comparing prices across multiple platforms. Some high-end hotels are even resorting to unconventional methods, such as setting up street food stalls, to attract customers and combat declining revenues. Trip.com, China's largest online travel agency, was fined 5.18 billion yuan ($765 million) in an antitrust probe for restricting hotels' ability to work with rival platforms. However, analysts believe this penalty is unlikely to materially alter hotel operators' pricing dynamics, as the sector remains reliant on promotions amidst soft consumer spending.

These developments are seen as reflections of a broader economic slowdown in China. Overall retail sales grew by only 1.3% in the first half of 2026, indicating insufficient domestic demand. The general economic outlook is being negatively impacted by declining consumer confidence, a tight job market, high youth unemployment, and a prolonged property slump. Despite government efforts to stimulate domestic consumption by adding public holidays, spending growth lags behind the increase in travel numbers. Moody's Analytics has described consumer spending as the “weakest link” in the economy. Furthermore, China's budget revenues fell in 2025 for the first time since 2020, partly due to weak domestic demand.

Analysts and market observers anticipate that price competition will continue to be the norm in China's hotel sector. In this environment, hotels are urged to differentiate themselves by offering unique experiences and niche products. Hilton China has revised its outlook, now expecting RevPAR to fall by low single digits this year, contrasting with earlier expectations for flat performance. Some industry players are attempting to innovate their business models by exploring new revenue streams beyond mere room sales.