Haitong International's latest research report indicates a high probability of RevPAR declines for hotels in the fourth quarter, with supply releases in 2027 continuing to exert pressure on RevPAR, though the trend toward chain consolidation remains unchanged. Industry experts predict Q4 RevPAR will likely fall due to reduced banquet bookings, fewer corporate annual meetings and supplier conferences, and a notable drop in exhibition activity during November and December, with only four events currently scheduled compared to significantly higher numbers in previous years.
The downward trend is expected to persist into 2027: stores signed in 2026 are slated for concentrated openings in 2027, and previously withheld properties will also enter the market, increasing supply and intensifying same-brand, same-tier competition, keeping RevPAR under sustained pressure. However, experts believe chain expansion will slow rather than halt — the national hotel chain penetration rate remains relatively low, mid-sized and smaller brands will be absorbed by leading chains, and talent and systems will serve as core competitive advantages. If the economy recovers between 2028 and 2030, consumers may increasingly favor chain hotels, with consumption trends continuing to upgrade toward four-diamond and five-diamond properties.
Key insights from Haitong International are outlined below.
Demand remains suppressed since Q3 with RevPAR down approximately 7% year-on-year
According to the expert sample, Q3 RevPAR across all properties (three-diamond and above) declined 7% year-on-year. Mid-to-high-end projects such as Atour and Crystal Orange posted only around 3% declines, demonstrating relative resilience. Economy hotels maintained stable RevPAR at approximately RMB 170 over the past two years, with a strategy focused on holding prices steady this year to protect occupancy — profits have declined, but traffic has remained flat. The most challenged segment comprises traditional three-diamond "pseudo-midscale" properties like older Vienna and older Lavande hotels: at a RMB 300 price point, consumers can add RMB 80-100 to stay at Jinjiang Inn's higher-tier All Seasons; alternatively, those seeking just an overnight stay can choose RMB 170-200 economy options. This positions them in an unfavorable middle ground, serving as the primary drag on overall averages.
Hotel net profit margin benchmarks have visibly shifted downward
Based on the expert sample, current store-level net profit margins stand at roughly 25%, a significant decline from the peak of approximately 47% seen in 2016-2017. Overall profit erosion this year amounts to about 4 percentage points, driven by declining revenue, rigid labor costs, tax and social security policy changes, e-commerce platform income tax reporting requirements, and increased service and dining costs. Some older properties are now operating at marginal profitability levels. In terms of cost structure, self-hired store labor accounts for approximately 18% of revenue, group management fees range from 12% to 17%, rent is generally controlled within 20% of revenue, and consumables and other operating costs add roughly 8 percentage points.
Industry contract signing activity has cooled notably as franchisee sentiment turns rational
Experts estimate industry contract signings this year will decline by at least 30% compared to last year. Franchisees can be categorized into three groups: mature professional owners are in a state of slow contraction or semi-wait-and-see, focusing on whether rents fall 20%-30% below market rates and diversifying investments rather than betting on a single brand; capital-backed owners retain a certain bottom-fishing mentality, introducing external funds through fixed-return or equity cooperation structures; and cross-industry speculative capital plus industry novices have noticeably retreated this year, facing pressure from inadequate site selection assessments and disappointing store cash flow. The industry as a whole has entered a more measured phase.
Brand densification has exceeded expectations, shifting investment logic toward property conditions and proximity protection
The expert declined to renew contracts with Huazhu Group this year, citing that leading chains' acceleration in store densification has far outpaced expectations, leaving insufficient store protection. Future brand selection will be driven by property conditions: properties capable of supporting only three-diamond positioning will still consider All Seasons (as the model standard); small-scale properties of 4,000-5,000 square meters will most likely choose Huazhu; four-diamond positioning favors Atour (for better quality); and properties with superior conditions will lean toward international hotel brands, with the goal of positioning stores over the next 7-10 years to accommodate consumer spending capacity of USD 100 per night.
Merchant comprehensive commission rates on Ctrip have declined as channel structures diversify rapidly
According to the expert sample, after Ctrip's new policies, commissions remain at 12%-15%, but comprehensive fee rates have dropped approximately 3 percentage points from past levels (with reductions in coupon issuance and traffic-burning activities). Channel structures have shifted markedly: Ctrip's share has declined, Douyin and Meituan have captured lower-end traffic, and younger customer segments are increasingly booking through Xiaohongshu and Xianyu. The expert believes the real vulnerability going forward lies in changing consumer demographics rather than commission reductions.
Hotel brand operators intensify service and supply chain initiatives; system automation emerges as the overarching trend
Huazhu has launched GOP-type assistance services over the past two months; the expert views their effectiveness as limited, since owners are unlikely to fully share real operational data — disclosing key figures such as rent would weaken their negotiating position. Huazhu is also advancing a JD-style forward warehouse model to reduce franchisee inventory and cash occupation. In new business ventures, brand operators are exploring insurance (property coverage) and equipment supply chains (air conditioning, water heaters, HVAC systems, and related equipment). The expert suggests GOP systems may eventually move toward automation and collectivization, with distribution and logistics costs likely being folded into fee structures — while mandatory implementation faces challenges, franchisees will find it difficult to resist.
Risk warnings
Recovery in business travel and exhibition/banquet demand falling short of expectations; extreme weather conditions repeatedly suppressing travel activity; excess supply from concentrated new store openings leading to sustained RevPAR pressure; rigid increases in rent, labor, and other costs alongside tax and social security policy changes eroding profits; and a retreat of cross-industry capital potentially triggering steeper-than-expected declines in industry contract signings.