Brand Changes in the 2025 China Hotel Market :: Hospitality Trends

China Hotel Investment Trends 2025: From New Development to Existing-Asset Management

China’s hotel industry is moving away from a growth model driven by property development and rapid expansion. In 2025, the sector is entering a new phase centered on the revitalization of existing assets, refined operations, and full-lifecycle asset management.

According to the 2025 China Hotel Investment and Asset Management White Paper, as hotel supply approaches saturation, product homogeneity intensifies, and operating growth comes under pressure, investors are shifting their attention away from the question of whether to develop a hotel. Instead, they are asking how a hotel can generate sustainable cash flow, improve its asset value, and eventually achieve an effective exit.

The report draws on Hohi Data Platform’s database of nearly 90,000 midscale and above hotels, representing more than eight million rooms, as well as survey responses from over 90 institutional investors and hotel asset owners. Its analysis covers hotel development and investment, asset operations, and asset exits.

The survey respondents were primarily state-owned enterprises, cultural and tourism groups, property developers, and professional investment institutions. The findings therefore mainly reflect the decision-making logic of institutional investors rather than that of individual hotel investors.

The Central Shift in Hotel Investment: From Expansion to Existing-Asset Optimization

The report shows that 76% of respondents identified refined management of existing hotel assets as a major priority for 2025, while 58% were focused on the renovation and upgrading of existing properties. By comparison, only 32% regarded new hotel development as a key area of work.

These results indicate that competition in China’s hotel industry is moving away from the development of new properties and toward the operational improvement of existing assets.

When revitalizing existing hotels, 53% of respondents preferred to begin with more refined operational management, while 27% planned to unlock asset potential through renovation and upgrading. Hotel owners are paying increasing attention to product positioning, operating performance, cost control, space efficiency, and the quality of cash flow, rather than relying primarily on property appreciation.

Many investors that previously focused on property development are also transitioning from developers into asset operators. Hotel investment is increasingly being managed across the entire lifecycle of an asset, covering investment, financing, construction, management, and exit. Operational capability has become a key factor determining the value of a hotel asset.

Which Types of Hotels Are Attracting Investors?

Select-service hotels and full-service hotels each attracted the attention of 62% of surveyed institutional investors. However, the investment logic behind these preferences is changing.

Traditional full-service hotels are often built around a model featuring large guestroom inventories, extensive food and beverage facilities, and substantial meeting and event space. These properties require significant capital investment, contain large amounts of supporting space, and tend to have relatively heavy operating cost structures.

As demand patterns change and investors adopt a more rational approach, the economic efficiency of this traditional model is being reassessed.

The following hotel products are attracting growing interest:

• Select-service hotels with more controllable investment costs

• Streamlined full-service hotels with reduced food and beverage, meeting, and other inefficient supporting facilities

• Mixed-use “hotel-plus-destination” projects

• Projects combining hotels with serviced apartments or long-stay accommodation

• Dual-brand hotels and other multi-product accommodation developments

In 2024, midscale and upper-midscale hotels accounted for 82% of all newly signed hotel projects. The number of newly signed upper-midscale hotels increased by 24.6% year on year.

Hotels with 150 rooms or fewer represented 64% of all newly signed projects, reflecting a broader shift toward smaller properties, lower development costs, and higher space efficiency.

At the same time, more offices, commercial buildings, and other existing properties are being converted into hotels. In 2024, 111 adaptive-reuse hotel projects were signed, accounting for 8% of all newly signed hotels.

Such projects are often located in established urban districts and can benefit from existing transportation networks, surrounding facilities, and customer demand while reducing the pressure associated with developing entirely new buildings.

Why Is Franchising Becoming an Important Hotel Investment Model?

In 2024, franchise agreements accounted for 73% of newly signed hotel projects, while fully managed hotels represented 26%. Among renovation and conversion projects, the proportion adopting a franchise model reached 82%.

Franchising is becoming increasingly attractive because it allows hotel owners to use an established brand, membership program, reservation system, and distribution network while retaining greater control over daily operations and costs.

The survey found that 56% of hotel owners would consider converting an existing management agreement into a franchise arrangement and directly participating in hotel operations.

As owners improve their professional hotel management capabilities, the relationship between hotel brands and asset owners is changing. The industry is moving away from a model in which owners rely almost entirely on hotel management companies and toward a clearer division of professional responsibilities.

This does not mean that hotel brands are becoming less important. Instead, investors are evaluating brands more rationally.

Among respondents, 81% considered brand recognition an important factor, while 72% paid attention to the operating performance of existing hotels under the same brand.

When selecting a hotel management company, 88% of respondents focused on the size of its membership base and its contribution through direct distribution channels. Another 64% considered the support capabilities of the management company’s China headquarters.

Investors are therefore no longer making decisions solely on the basis of brand reputation. They increasingly want evidence that a brand can generate demand, deliver a meaningful revenue premium, and improve the hotel’s operating performance.

Improving Hotel Operations Begins with Inefficient Space

Data from the report shows that guestrooms account for approximately 47% of the total area of China’s five-star hotels but generate 59% of total revenue.

By contrast, food and beverage outlets, banquet and meeting facilities, recreational areas, and public spaces account for 53% of total hotel area but contribute only 41% of revenue.

When asked which areas were operating inefficiently, 51% of respondents identified specialty restaurants and bars, 44% selected Chinese restaurants, and 38% pointed to executive lounges.

To improve the performance of these spaces, 89% of respondents planned to introduce external operators through leasing, joint operations, or similar arrangements. Another 55% were considering changes in function, such as converting inefficient restaurants, meeting rooms, or public areas into guestrooms, retail space, offices, wellness facilities, or other revenue-generating uses.

However, leasing hotel space to external operators involves more than dividing the property and collecting rent.

Owners must determine whether the external business is compatible with the hotel’s positioning, guest profile, and overall operation. Effective space optimization should not only increase rental income but also improve the guest experience and enhance the value of the hotel asset as a whole.

Cutting Labor Costs Alone Can No Longer Solve the Profitability Challenge

In 2024, the staff-to-room ratio of five-star hotels in China fell to 0.91, the lowest level recorded in nearly a decade. Hotels have already made substantial reductions in staffing levels, total payroll, and back-office positions.

However, the profitability data indicates that upscale full-service hotels have not been able to reverse declining profits simply by reducing headcount.

By comparison, upscale select-service hotels reported a staff-to-room ratio of approximately 0.71, around 31% lower than that of upscale full-service hotels.

This suggests that hotel operational improvement cannot depend indefinitely on staff reductions and cost compression. More sustainable improvement requires a redesign of the product model, space allocation, organizational structure, and operating system.

For some traditional full-service hotels, converting inefficient supporting facilities into lighter and more productive uses may be more effective than continuing to reduce staffing.

Franchising, third-party operation, flatter organizational structures, and more flexible operating models may also offer stronger long-term results than repeated cuts to labor costs.

Hotel Digitalization Is Moving from Property-Level Systems to Group-Wide Management

More than half of the surveyed companies have already established a centralized accommodation asset data platform at the headquarters level. Another 20% plan to complete such a platform within the next two years.

The digital priorities receiving the greatest attention include:

• Integrated operational and management platforms, selected by 65% of respondents

• Digital marketing and distribution management, selected by 55%

• Cross-business membership integration, selected by 49%

• Business intelligence and performance-monitoring dashboards, selected by 47%

• Shared-service centers covering finance, human resources, engineering, and other administrative functions, selected by 45%

Only 6% of respondents identified artificial intelligence applications in specific business scenarios as a major priority.

This suggests that hotel digitalization is still primarily focused on establishing data standards, monitoring operating performance, developing distribution channels, and improving management coordination. AI adoption within the hotel industry remains at a relatively early stage.

In addition, 42% of surveyed companies have established owner-controlled hotel reservation channels, while 32% operate membership platforms covering multiple business categories.

For groups that own hotels, commercial properties, apartments, tourism attractions, wellness facilities, and senior living assets, membership integration can transform fragmented customer databases into a unified customer asset.

This can help reduce acquisition costs, encourage cross-business consumption, and improve collaboration across the group’s different operations.

Renovation of Existing Hotels Will Create New Market Demand

In 2024, a total of 1,572 midscale and above hotels in China changed brands. Of these, 719 were hotel rebranding projects, representing an increase of approximately 71% compared with 2023.

Among owners planning to rebrand their hotels, 83% expected to limit the property improvement plan budget for each individual project to less than RMB 50 million.

This shows that while owners hope to improve performance through rebranding, they remain cautious about capital expenditure.

The report estimates that approximately 1,718 upscale and above hotels will require renovation over the next five years. Second-tier cities are expected to contain the largest number of potential renovation projects.

Future hotel renovation will not follow a single standardized model.

Hotels with relatively stable operations may adopt conservative improvement programs focused on repairing or replacing facilities. Properties whose products no longer match market demand may carry out targeted product adjustments. Hotels that have suffered a significant decline in competitiveness may require complete repositioning and comprehensive renovation.

Regardless of the approach, owners need to define the hotel’s future positioning, target customer groups, and expected investment return before beginning the renovation.

Hotel renovation should not be treated simply as a design or decoration project. It is fundamentally an investment decision intended to improve the hotel’s business model and asset performance.

Hotel Transaction Activity Is Expected to Increase, but Asset Prices Remain Under Pressure

Regarding the hotel transaction market in 2025 and 2026, 49% of respondents expected activity to increase, including 13% who anticipated a significant increase.

Domestic companies continue to dominate hotel acquisitions, accounting for approximately 94% of buyers.

Financial institutions and financially backed companies are important participants. Companies from the energy, manufacturing, business services, and real estate sectors are also beginning to include hotels in their asset allocation strategies.

Around 60% of major hotel transactions took place in first-tier and new first-tier cities. Upscale hotels accounted for 46% of the traded assets, while hotels with between 200 and 400 rooms represented 54% of transactions.

Despite expectations of greater market activity, investors remain cautious about asset pricing. A total of 73% of respondents expected hotel transaction prices to decline in 2025.

The disposal of assets by property developers, an increase in the number of hotels offered for sale, and weaker investor risk appetite are giving buyers greater negotiating power.

Investor expectations for hotel capitalization rates also differ significantly by city tier.

The average expected capitalization rate was approximately 4.7% in first-tier cities, 5.8% in new first-tier cities, 7.1% in second-tier cities, and 8.5% in third-tier and lower-tier cities.

The lower the city tier, the higher the return generally required by investors to compensate for market, liquidity, and operating risks.

Hotel Exit Strategies Are Expanding Beyond Direct Asset Sales

Among surveyed companies, 56% planned to sell hotel assets or pursue some form of financial exit within the following year.

Of the companies with exit plans, 73% were considering a direct asset sale, while 60% were interested in REITs, commercial mortgage-backed securities, or similar quasi-REIT structures. Some companies were also considering debt replacement and bond issuance.

At present, there are still restrictions on the independent listing of hotel assets through publicly offered REITs in China. However, some hotels may be included as supporting assets within tourism, commercial property, or industrial park portfolios.

Meanwhile, a growing number of hotel owners are beginning to prepare their properties for Pre-REIT or quasi-REIT structures.

This means that hotel investment should not focus exclusively on project development and post-opening operations.

Investors need to define the expected holding period, renovation strategy, financing structure, and potential exit route at the beginning of the project. A complete investment cycle should be designed with the eventual exit in mind.

Conclusion: Hotel Competition Is Becoming a Competition in Asset Management Capabilities

The major changes taking place in China’s hotel investment and asset management market in 2025 can be summarized as three transitions:

The first is a transition from new hotel development to the revitalization of existing assets.

The second is a transition from decision-making based mainly on brand reputation and management experience to more professional, data-driven operations.

The third is a transition from a single strategy of long-term ownership to full-lifecycle management covering investment, operations, renovation, financing, and exit.

The hotel assets with the strongest future competitiveness will not necessarily be the largest properties, the most luxurious brands, or the projects with the greatest number of supporting facilities.

Instead, competitive hotel assets will be those that can continuously adapt to changing demand, generate stable cash flow, and achieve long-term value growth through professional management.

For hotel investors and owners, refined operations, product restructuring, digital management, and exit planning will become essential capabilities in the industry’s next development cycle.

Frequently Asked Questions What is the most significant hotel investment trend in China in 2025?

The most significant trend is the shift from new hotel development to the management and improvement of existing assets. Among surveyed institutional investors and owners, 76% identified refined asset management as a key priority, while 58% were focused on the renovation and upgrading of existing hotels.

Which hotel categories are attracting the most investor interest?

Select-service hotels, streamlined full-service hotels, serviced apartments, and mixed-use “hotel-plus” projects are attracting growing interest. Investors are placing greater emphasis on development costs, operating cash flow, space efficiency, and long-term asset value.

Why are more hotels adopting franchise agreements?

Franchise agreements allow owners to use established hotel brands, membership programs, technology systems, and distribution channels while maintaining greater control over hotel operations and costs. In 2024, franchises accounted for 73% of newly signed hotel projects.

What should be the main focus of an existing hotel renovation?

The focus should not be limited to interior refurbishment. A successful renovation should reconsider the hotel’s positioning, optimize inefficient space, improve organizational efficiency, strengthen its product competitiveness, and enhance cash flow.

How are investors planning to exit hotel assets?

Direct asset sales remain the most common exit strategy. At the same time, investors are showing increasing interest in REITs, commercial mortgage-backed securities, debt replacement, bond issuance, and other financial exit structures.

Source: Horwath HTL and Hohi Data Platform, 2025 China Hotel Investment and Asset Management White Paper.

Source: View the original article at HorwathHTL.