Summary of Key Points
This summer should have been the “golden peak season” for the hotel industry, but business was far from expectations—both occupancy rates and room prices declined, leading to many already-open hotels closing suddenly (some even failing to pay their employees). There were 224 hotels that were registered but closed within just two months of opening. The reasons behind this are not just the lack of success during the summer season; rather, they reflect long-standing problems in the industry: an oversupply of hotels (with the total number of rooms reaching a record high), a decline in consumer spending on the demand side (although the number of travelers has increased, each person spends less), and significant structural differences within the market. Low-end and brand-less hotels struggle to survive, mid-range hotels engage in price wars, while high-end hotels rely on uniqueness to make profits. Additionally, the high fixed costs associated with running a hotel (rooms cannot be “stockpiled” for future sale) mean that even small losses can lead to insurmountable financial difficulties.
Detailed Analysis
1. The Summer Peak Season Failing to Meet Expectations: The Last Straw
The summer season accounts for half of a hotel’s annual revenue—for example, the third quarter (including July and August) generates more income for A-share listed hotels than any other quarter. However, July started off on a down note:
- Occupancy Rates Dropped: In the first week of the summer, occupancy rates for budget hotels decreased by 4.7%, mid-range hotels by 3.9%, and luxury hotels by 0.2%. Although there was some improvement in subsequent weeks, they never reached last year’s levels.
- Room Prices Also Fell: In the same first week, budget hotel room prices dropped by 3.7%, mid-range by 4.1%, and luxury by 2.8%. Prices did not recover throughout July.
- Profitability Declined: With both occupancy rates and prices falling, revenue per room (RevPAR) also decreased. In the last week of July, luxury hotels earned 6.4% less per room compared to last year, and mid-range hotels 2.2% less.
The expected boost from the summer season only made things worse, pushing some hotels over the edge. For instance, the Qingning Hotel in Xi’an experienced a power outage and had to close, failing to pay its employees. Other hotels saw frequent cancellations, with front desks owed two months’ worth of salaries.
2. Oversupply Meets Declining Consumption: A “Stock Market” Situation Where There’s More Competition for Fewer Customers
The current problem in the hotel industry is that there are too many hotels and consumers are less willing to spend:
- Rapid Supply Growth: From 2023 to the first half of 2026, the number of hotels with more than 15 rooms nationwide increased from 312,000 to 419,000 (an increase of over 30%), with nearly 20 million rooms, a record high.
- Demand That’s Not Keeping Up: Although the number of travelers in 2025 (6.522 billion) exceeded that of 2019, per-trip spending decreased by 5.56% to 966 yuan. In other words, although more people are traveling, they are spending less on accommodations.
This has led to a “stock market” situation where each additional hotel sold means one fewer room is sold for others. For example, some hotels planning to open around National Day or next year simply decide to cancel their registration after realizing they won’t be able to cover their costs and close within two months without even having a sign up.
3. Severe Structural Differences Within the Industry
The hotel industry is experiencing a stark polarization:
- Low-End/Brand-Less Hotels: These hotels face the greatest survival pressures and are closing at an accelerated rate. Small, non-chain hotels without unique features, customer loyalty programs, or significant scale cannot compete.
- Mid-Range Hotels: Although they seem active, they are in a vicious cycle of price competition. With similar products (standardized rooms), hotels lower prices to attract customers, but no one makes a profit.
- High-End Hotels: Some with unique locations or cultural attractions continue to do well, but many generic high-end hotels struggle.
- Chain vs. Independent Hotels: Chain hotels are becoming stronger. In 2025, the chainization rate was 41.8%. Leading groups use their scale (thousands of hotels nationwide), customer loyalty programs, and better cost control to dominate the market, leaving independent hotels with fewer opportunities.
4. The “Curse” of High Fixed Costs: Losing Money Whether Open or Closed
The cost structure of hotels is different from other industries, which is why they are prone to sudden closures:
- High Proportion of Fixed Costs: Fixed costs (rentals, employee salaries, maintenance, energy consumption, etc.) account for 53% of total costs in five-star hotels. This is higher than in other sectors (e.g., less than 30% in the retail industry).
- Rooms Cannot Be Stockpiled: Unlike products that can be stored, empty hotel rooms are lost forever if not booked. If room prices fall below cost, operating a hotel results in continuous losses. For example, if a room costs 150 yuan but is sold for 120 yuan, operating it loses 30 yuan per day. However, even if the hotel closes, fixed costs like rent and depreciation must still be paid, potentially leading to even greater losses.
Many hotels cannot afford to close; they continue to operate at a loss until they can no longer sustain it, resulting in sudden closures that leave customers and employees in trouble.
Conclusion
The wave of hotel closures this year is not just due to a weak summer season but is the result of long-term issues such as oversupply, declining consumer spending, structural differences, and high fixed costs. In the future, only hotels with unique features, effective cost control, or strong brand recognition (such as chain hotels) will survive this “cleaning out” process. For consumers, it’s advisable to choose chain brands when traveling to avoid unexpected closures.