Summary of Key Points
This year, the number of homestay bookings during the May Day holiday exceeded that of traditional hotels for the first time. However, the competition between homestays and hotels is not one of mutual exclusion. While homestays seem to be booming, they face intense competitive pressures due to their seasonal nature, high renovation costs, and the conflicting needs of guests. The real threat to hotels does not come from homestays but rather from an oversupply of similar establishments (driven by the real estate sector). The boundaries between the two types of accommodations are blurring: homestays are adopting standardized practices, while hotels are striving to provide a more personalized experience. In the future, only those that can offer both reliability (standardization) and surprise (personalized experiences) will survive.
Homestays: A Boom That Masks Intense Competition
Homestays were very popular this May Day, but industry expert Luo Ran dispelled the myth of huge profits:
- High-season earnings must support the entire year: Popular homestays in tourist areas are always full during holidays, but the demand is highly seasonal, and they rely on regular guests during off-peak times, which may not result in profitability.
- Renovation pressure: Homestays need to be renovated every five years; otherwise, guests will be deterred by outdated facilities.
- Meeting guest expectations is challenging: Guests want a personalized, artistic space but also the convenience of a hotel (such as office facilities).
- Fierce competition: In 2024, there was a rush to open homestays across the country, leading to many closures in 2025. Only those that can maintain a stable customer base will survive until 2026. New entrants are constantly upgrading their services (if you offer the first generation of services, others will offer the second generation immediately).
Homestays attract guests because they combine the comforts of hotels with the personalized experience of homestays, but the underlying pressures are greater than many realize.
Hotels: The Real Threat Comes from Excessive Competition
Hotel owner Chen Lang believes that homestays do not take away business from regular customers; they mainly compete for mid-to-high-end guests in tourist areas. The real problem for hotels is an oversupply:
- Where does the excess come from? Too many houses have been built for use as hotels, driven by the real estate market. After the pandemic, there was a surge in hotel franchises, with more than 10,000 new hotels added nationwide, three times the normal demand.
- Decline in business travelers: Companies are cutting travel budgets, and remote work has replaced many business trips.
- Franchisees face difficulties: Eighty percent of mid-range hotels franchised in 2021-2022 did not break even (whereas they would have done so in 2018). Franchises require a ten-year contract, but standardized products are updated every four to five years, and renovations are costly. Exiting the franchise comes with penalties, leaving them in a difficult position.
- Profit shrinkage: The monthly net profit of mid-range hotels has dropped from over 100,000 yuan to around 100,000 yuan, with costs pushed to the limit, and only 30% of hotels are still profitable.
The issue for hotels is not homestays competing for business but rather an excess of similar establishments, leading to price wars and declining profits.
Homestays and Hotels Are Becoming More Similar
Homestays and hotels are increasingly mirroring each other's practices:
- Homestays becoming more hotel-like: They are adopting standardized services (safety, hygiene, etc.) and improving their experience (e.g., training for homestay managers in Zhejiang).
- Hotels becoming more homestay-like: Hotels are offering various experiences (theme rooms, gaming rooms, wellness facilities), and even converting meeting halls into theaters for performances.
- Why this convergence? Consumers have changed: They no longer just want a place to sleep; they seek a place that reflects their personal style and provides emotional value, different from standard hotels.
The boundaries between homestays and hotels are disappearing. The question is no longer which will prevail but which can better meet consumers' new needs.
Survival in the Future Depends on Offering Both Reliability and Surprise
In the past, industries were dominated by positive reviews. Businesses offered gifts or bribed reviewers to boost ratings, leading to a decline in service quality. In the future, only those that can provide both reliability and surprise will succeed:
- Reliability is a hotel's strength: clean rooms, safety, convenience.
- Surprise is a homestay's strength: personalized experiences and emotional value.
- For example, homestays can maintain standardized hygiene while still offering unique themes, and hotels can provide reliable services along with customized experiences (e.g., arranging rooms according to guests' preferences).
In short, businesses must balance standardization and personalization to attract today's consumers.
This news analysis highlights that the competition between homestays and hotels is ultimately about meeting consumer needs—those that can offer both reliability and a unique experience will be the winners.