Homestays have pushed hotels into such cutthroat competition that they can barely sleep easy.

Chen Lang manages more than a dozen chain hotels. This year has been even tougher than before - the occupancy rate has dropped, room prices have fallen, and profits have shrunk significantly.

What makes hotel industry practitioners feel even colder is a set of data: during the "May Day" holiday this year, the proportion of homestay bookings reached 55%, surpassing traditional hotels for the first time.

Homestays seem to be giving hotels a hard time. But things are not that simple.

#01

Homestays, in a Fierce Competition

"Business is better this year than last year."

Luo Ran runs homestays in Xi'an and Bortala, Xinjiang. One-third of her homestay rooms in Xi'an are budget rooms, and two-thirds are mid-range rooms. Her homestay in Xinjiang is positioned as mid - to high - end.

She told the True Story Research Lab that many popular homestays were fully booked more than twenty days before the holiday. In terms of booking channels, in Xi'an, most bookings are made through homestay platforms like Meituan and Tujia, while in Bortala, Xinjiang, many bookings are made through Ctrip, and there are also quite a few orders from Douyin. The ones that are truly full are mainly the boutique and mid - to high - end homestays in scenic areas.

Different customer sources require different strategies. Urban customers are price - sensitive and will compare prices repeatedly for a difference of dozens of yuan. Tourists in scenic areas have stronger spending power and are more willing to pay for the unique charm and emotional value.

"Nowadays, homestays are actually run according to hotel standards. They have the essence of a hotel and the appearance of a homestay, so naturally, guests prefer homestays," Luo Ran said. Having a yoga room, a meditation room, and a private audio - visual space, which can make guests happy, is the real skill.

In daily operations, what bothers her the most is the customers' "want it all" attitude. They want a personalized space and experience but are also reluctant to give up the standardization and convenience of a hotel.

"Some rooms are designed as art spaces, and even an extra chair would be out of place. But some guests, who actually have business travel needs and carry laptops for work, will question why there isn't even a table in the room."

Luo Ran is a bit helpless: "We have projectors, unique designs, and facilities for parent - child fun, which hotels don't have. Why doesn't anyone praise us for that?"

Although homestays are booming, they are not easy to run. Luo Ran doesn't dare to slack off now.

Tourist cities have strong seasonality. The income during the peak season has to support the whole year, and during the off - season, it still depends on regular customers. The outside world only sees the "huge profits" when room prices multiply during holidays, but ignores the long off - season. Calculated over a year, it's not necessarily profitable.

Moreover, homestays need to be renovated every five years and can't be too old. "When guests search online and find that your homestay was renovated in 201X, that sense of age will directly discourage them."

"2024 was probably the year of the most intense competition. At that time, it seemed that the whole city was scrambling for houses, and any house was turned into a homestay. In 2025, the market began to reshuffle, and a group of those who couldn't hold on closed down one after another. Those who survived until 2026 have mostly built up a stable customer base and good reputation and are the truly competitive ones," Luo Ran said.

However, the low threshold still continuously attracts new entrants, and the new players are not inexperienced at all - "While you're still at the first - generation level, others have already entered at the second - generation level. And in a while, there will be those starting from the third - generation level."

Homestays keep absorbing and iterating, and the products are getting better and better. Those who can't keep up with the pace will soon be left behind.

#02

Hotels, More Afraid of Competitors in the Same Industry

Chen Lang has worked in the Jinjiang Group for six or seven years. Now, the hotels she has invested in and managed add up to dozens, and she also provides business consulting for her peers.

Chen Lang told us that since this year, the occupancy rate and room prices of many hotels have been lower than last year. Many mid - range rooms didn't see a peak in bookings until the middle of the holiday. Some stores had to lower prices and increase sales volume to maintain customer flow.

"Normally, homestays can't take away the business of hotels. They only compete with hotels in tourist destinations," she believes. In her opinion, homestays and hotels are not on the same track at all.

This time, when the homestay booking volume exceeded that of hotels during the May Day holiday, it was mainly the mid - to high - end homestays that outperformed. "For budget small - apartment homestays, people don't have as many choices and still prefer standardized chains because the hygiene is guaranteed."

She also admits that consumer demand is being segmented. "More and more people don't want standardized products anymore. They are more willing to choose resort hotels with tourism attributes and non - standard brands to experience different emotional values. In the end, consumers are more willing to pay for their own experience. They want a place that looks good for taking photos, offers a great experience, and is different from staying in a standardized hotel."

What really keeps hotel industry practitioners awake at night is actually their own peers. Overcapacity is the root cause of everything.

"The hotel industry in China is actually closely related to the real estate market," Chen Lang said. "So many hotels have opened in the market because too many houses have been built. People have to find a way to make these houses valuable, so they turn them into hotels."

The combination of real estate, the pandemic, and the boom in hotel franchising has led to a situation where "since 2021, the number of hotels across the country has increased by more than ten thousand, almost three times the normal market demand." At the same time, companies have cut business travel budgets and replaced business trips with online work, and the business traveler group that once supported half of the hotel industry is shrinking.

"Hotels all look the same and really lack features," Chen Lang said. When guests choose a chain hotel, they are actually buying something standardized and predictable. "When a new hotel opens nearby, people will try it first."

Chen Lang did some calculations: for a mid - range hotel with 80 to 100 rooms, in good times, the monthly net profit could reach more than a hundred thousand yuan, and at the peak, more than two hundred thousand yuan. Now, it's only around a hundred thousand yuan. The cost has "been squeezed to the limit. If it's further reduced, normal operation will be a problem." In her opinion, only about 30% of the hotels in the market can still make considerable profits.

Most of those who have suffered the consequences are franchisees. They hoped that the brand would bring traffic and income, but instead, the traffic didn't come, and they still had to pay management fees, store manager fees, central reservation fees, and purchase from designated suppliers. "Most of these mid - range hotels were franchised in 2021 and 2022, and 80% of them still haven't recovered their investment," Chen Lang said. In 2018 and 2019, it only took a little over three years to recover the investment, "because the market size was not that large at that time."

What's even more difficult is that franchise agreements for chains usually last for ten years, but standardized products are updated every four or five years. "Many stores haven't recovered their investment yet, and it's impossible to follow the brand's renovation pace. If they withdraw, they have to pay a penalty. If they hold on, they have to keep losing money every month. This dilemma is what really keeps hotel people awake at night."

"The hotel industry is now in a period of transformation and elimination," Chen Lang said. Only those who can survive this round of reshuffle can move on to the next stage.

#03

The Boundaries between Categories are Disappearing

The boundaries between homestays and hotels are disappearing. When homestays have to learn the standardization of hotels and hotels have to learn the experience of homestays, the question of "who will defeat whom" may have become outdated.

The "hotelization" of homestays has become a trend. "Previously, people generally thought that homestays represented individuality," Luo Ran said. "But to be honest, individuality without the support of standardization will eventually fail."

Standardization also has a system to rely on. In Tiantai, Zhejiang, the local government has launched a service certification for "Tiantai Mountain Homestays," breaking down more than thirty specific indicators from four dimensions: safety, hygiene, comfort, and features. Homestays that pass the certification can hang a unified regional brand logo. In Deqing, Zhejiang, the country's first homestay butler training school has broken down service processes, reception etiquette, and emergency handling into quantifiable standards, and more and more practitioners are starting to obtain the "Homestay Butler" professional qualification certificate.

The "homestay - like" transformation of hotels is also accelerating. From script - killing themed rooms to cultural IP hotels, from e - sports rooms to health - care resorts, operators are starting to sell scenarios, and the role of the guest room sales manager has become that of an experience planner. Some hotels put steam eye masks and moxibustion patches in the rooms, and some even convert the lecture hall into a professional theater for guests to watch a show.

The fundamental reason why homestays and hotels are getting closer to each other is that consumers are no longer just paying for "a bed." This generation of consumers regards a night's stay as a choice of self - expression and lifestyle, and their needs have become fragmented, scenario - based, and emotional.

When the industry is deeply involved in the vicious competition, platforms are starting to re - calibrate their roles: instead of being traffic harvesters, they are becoming the "stabilizers" of the business ecosystem.

Some changes are taking place. In the past, the entire industry was driven by "good reviews." The score directly determined the traffic and exposure. Operators were at the mercy of guests, and any big or small thing could become a bargaining chip. To get high scores, many merchants gave away freebies, begged for likes, and even engaged in fake reviews. The over - effort led to distorted actions, and the service gradually deviated from its original purpose.

Since the second half of last year, Ctrip has lowered the high - score threshold from 4.8 to 4.7, encouraging merchants not to compete for scores. At the same time, it has focused on cracking down on malicious negative reviews, professional review trolls, and those who use negative reviews to extort money.

Meituan has also upgraded its review system. It uses AI to identify fake reviews, block malicious negative reviews, and extracts high - frequency problems into business suggestions, turning negative reviews into an "improvement list."

Once the rules change, the differentiation intensifies. Merchants with poor service and sub - standard experiences are losing orders faster and faster, while those who really focus on reputation and operation are getting more opportunities in the adjustment.

In the future, the ones that can survive will not be "homestays that are more like hotels" or "hotels that are more like homestays," but new species that can deliver both certainty and a sense of surprise.

This article is from the WeChat official account "True Story Research Lab." Author: Jingling, Editor: Zhang Duo. Republished by 36Kr with authorization.