China’s hotel industry is undergoing a fundamental transformation, shifting from rapid expansion to sophisticated asset management strategies. This transition comes as domestic brands like Jinjiang, Huazhu, and BTG increasingly challenge international chains through operational flexibility and cultural localization. Speaking at the 14th China Hotel Culture Festival, Zhou Tao, Managing Director of JLL’s Hotels & Hospitality Group for Greater China, provided expert insights into these evolving market dynamics through an exclusive interview.
The Rise of Homegrown Hospitality Champions
“China’s big three hotel groups have entered the global top 10 by property count,” Zhou revealed, citing the 2025 China Hotel Group and Brand Development Report. Their competitive edge lies in balanced urban-rural distribution, cost-effective development, and flexible operating models including franchising and leaseback arrangements. Particularly noteworthy is their strong performance in mid-to-upscale segments, where Zhou notes “healthier investment returns” compared to international counterparts. Domestic brands are also leading in digital innovation, with AI integration becoming a hallmark of their service upgrades. As Chinese outbound tourism rebounds, Zhou anticipates these brands will increasingly follow travelers abroad, replicating their domestic success through culturally-attuned services and familiar dining experiences.
Repositioning China’s Hotel Stock for the Next Era
The industry’s new mantra—”Repositioning, Rebranding, Renovation, Rejuvenation”—reflects the urgent need to upgrade existing assets. Zhou identifies prime-location properties as particularly promising candidates for value enhancement, though challenges persist. “Many state-owned holders lack renovation funds,” he explained, resulting in aging properties losing ground to new competitors. The potential inclusion of hotels in China’s REITs market could unlock vital capital for these assets. Zhou emphasizes five non-negotiable upgrade priorities: soundproof rooms, reliable WiFi, premium mattresses, strong shower pressure, and nutritious breakfasts—fundamentals that directly impact asset valuation.
Global Lessons for Local Asset Management
China’s hospitality asset management remains nascent compared to mature markets, where Zhou identifies critical benchmarks. “Chinese luxury hotels average over 160 sqm per room with excessive non-revenue space,” he noted, resulting in sub-2% returns on assets—far below international standards. Markets like Singapore and Australia demonstrate how professional asset managers add value throughout a property’s lifecycle, from feasibility studies to exit strategies. Particularly instructive is their active transaction markets where hotels frequently serve as REITs components, creating liquidity absent in China. Zhou advocates adopting these practices while maintaining focus on evolving consumer needs through “softening hardware and hardening software”—blending physical comforts with service excellence.
Cyclical Resilience Through Strategic Differentiation
Looking ahead, Zhou sees bifurcation defining China’s hotel valuation landscape. Urban luxury properties will increasingly compete on experiential differentiation, while select-service hotels in secondary markets must demonstrate operational efficiency. Successful operators will blend global best practices with local innovations—whether through tech-enabled personalization or culturally-rooted design. “The next phase rewards those who treat hotels as dynamic assets rather than static real estate,” Zhou concluded, highlighting JLL’s research showing optimized properties achieving 30-40% higher valuations post-renovation. As market cycles intensify, this asset-conscious approach may determine winners in China’s new hospitality era.
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