As many as 100,000 hotel rooms are coming on to the market in China this year which may cause a glut.
Last year, occupancy in five-star hotels in Beijing was reported to be just 47.5%, with room rates averaging a modest RMB836 (US$126). Hotels blamed the global economic crisis and the end of the 2008 Olympics.
Those excuses do not explain why gross operating profit per room in five-star hotels nationwide is said to have dropped for four years in a row.
One budget chain that has already grown rapidly is Home Inn, which offers rooms for less than RMB100 (US$15).
The National reports Home Inn has more than 650 hotels – up from 10 properties seven years ago. Revenue jumped from RMB1.9 billion (US$285.4 million) in 2008 to RMB2.6 billion last year. Possibly the problem for other hotels are caused by room prices.