Summary of Key Points
The golden era of easy profits in hotel investment has come to an end: In the past 2-3 years, it was possible to recoup the investment; now, a 5-year return on investment is considered a good outcome, and in the future, only 20% of investors may be able to make a profit. The reason is an oversupply that has compressed prices and profits. However, hotels remain valuable due to their stable cash flows and higher returns compared to risk-free investments such as government bonds. Investors are adjusting their strategies: they no longer blindly trust large brands but are turning to regional brands or those with a strong contractual reputation. They are taking advantage of falling rents to buy properties at low prices, using flexible profit-sharing models to reduce risks, and even considering owning properties outright.
1. Why Can't the Golden Era Be Returned to?
In the past, there were few hotels and many guests, and with a good location, joining a large brand guaranteed steady profits. Today, the situation is different: from 2023 to 2026, the number of hotels with more than 15 rooms nationwide increased from 312,000 to 420,000 (a 30% increase), and even if the growth rate slows down after 2025, it is still 6% annually. With more hotels and the same number of guests, prices have to be lowered to compete. Except during National Day and Spring Festival, hotel revenue per room (RevPAR) has been lower since 2024 than in 2019. As a result, the investment recovery period has lengthened—what used to take 2-3 years now typically takes 4-6 years, and in highly competitive areas, it may take 6-9 years. The annual return on investment has also decreased from high figures in the past to 8%-12%.
2. Lower Returns, but Why Is It Still Worth Investing?
Although profits are lower, the annual return of 8%-12% from hotel investments is still 5-7 times that of risk-free investments (such as 1.69% from 10-year government bonds). Hotels are also a “cash-flow business” that generates income every day they are open, unlike stocks that can become trapped in a loss. Of course, hotels face competitive risks, but for investors willing to hold for the long term, the stable cash flow is still attractive, though they can no longer expect quick profits.
3. Large Brands Are No Longer Attractive? Investors Are “Voting With Their Feet”
In the past, joining a major brand meant accessing millions of members and a central reservation system (CRS), which guaranteed a steady stream of guests. However, this is no longer the case: too many hotels of the same brand in the same area dilute the traffic for each store. Moreover, large brands often have unfair terms, leaving investors with little say. As a result, many investors are turning to regional brands. While these brands don’t have a national membership base, they offer more control over renovation costs and can customize products to local needs (for example, adding a tea break area if local guests prefer tea). They can also address issues directly with the hotel manager, making decisions more quickly. Any shortfall in traffic can be made up for through online travel platforms (such as Ctrip and Meituan), social media platforms like Douyin and REDnote, or local business partnerships, as long as the overall return is worthwhile. Investors conclude that while membership is a bonus, the location of the property, rent, and the surrounding business environment are the key factors.
4. Buying Properties at Low Prices During a Downward Trend: Flexible Cooperation for Professional Investors
Despite the challenges in the industry, experienced investors see opportunities. With the current economic downturn, many shops are unsold, and rents are falling (81.5% of shops on top commercial streets have seen rent reductions). Good locations that were previously unattainable are now available at lower rents, and the cooperation models have become more flexible—instead of just paying rent, investors opt for revenue sharing, profit-sharing, or a guaranteed rent plus a percentage of profits, sharing the risks with the landlord.
For example, Investor C opened four hotels in a first-tier city this year due to the low rent and favorable location. They also consider owning properties in the future, as owning them provides greater risk resistance (no need to worry about landlords raising rents or taking back the property). In summary, investors no longer aim for short-term huge profits but focus on controlling costs and collaborating flexibly to lock in risks and earn profits through long-term operations.
5. Future Trends: A New Starting Point for Professional Investors
The easy profits of the golden era are gone, but for professionals who understand market cycles and know how to operate hotels, this represents new opportunities. They no longer rely on brand reputation but on the quality of properties, cost control, and local operational capabilities. The industry is becoming more specialized, and inexperienced individuals may be eliminated. Experienced investors, however, can find stable returns through strategies such as buying properties at low prices, collaborating flexibly, and owning them.
In short, hotel investment has shifted from being a “quick money” opportunity for everyone to one where only professionals can earn steady, if slower, profits.