China’s hotel sector is showing signs of strain as revenue per available room (RevPAR) fell 8% year-over-year during the first week of the 2025 summer holiday, according to a Morgan Stanley report. The decline is mainly due to lower occupancy and hotels overpricing in anticipation of stronger demand.

This follows a broader industry trend: RevPAR dropped 5% in Q1 2025, and although the Labor Day holiday brought a brief recovery, new government alcohol restrictions introduced in late May have severely impacted the hotel and food & beverage sectors. High-end hotels are also suffering from a sharp decline in business travel, meetings, and events, as companies enforce strict cost-saving measures, including travel limits and a shift to virtual meetings.

Oversupply adds further pressure — China’s hotel count reached 348,700 in 2024, a record high, while homestay operators surged, with over 60% of the 331,000 registered businesses founded in the past three years. Although tourist numbers remain steady, the expanded lodging supply has intensified competition, spreading demand thin and leaving some hotels struggling.