S2 Assignment-3 Has the hotels become cheaper?

https://video.wixstatic.com/video/a7b903_8ac09958ac5d4b7ca0587a6c63fc63ac/1080p/mp4/file.mp4

Taken in Nov.2025-Jan.2026 Post on 17 Jan 2026.

Produced By: Ningxiao Wang / Taoren CHEN

Behind the Hotel Industry's Price Wars: The Dual Game of Low-Price Dividends and Industry Concerns

" Five-star hotels are becoming increasingly affordable, with non-holiday stays available for just a few hundred yuan, yet service remains as attentive as ever." This observation from frequent business traveler Jiang Zaoru captures a significant shift in the hotel industry.

Yet behind this apparent consumer benefit, an industry-wide price war is quietly rewriting the rules of the game. Its ripple effects are imposing invisible costs on the industry, its workers, and consumers alike.

1.Data Insight: The Industry's Dilemma of Growing Volume but Declining Profit.

Data from the National Bureau of Statistics on the accommodation and catering industry from 2015 to 2024 shows that, excluding the pandemic-impacted period from 2020 to 2022, while total room revenue in the accommodation sector rose in 2024, the average revenue per room declined significantly, falling far below the levels seen during the same period from 2015 to 2019. More notably, from 2019 to 2024, the number of lodging enterprises nearly doubled, yet total revenue grew by only a quarter, resulting in a sharp decline in average revenue per enterprise. This highlights the industry's predicament of “increased volume but diminished profit.”

Multiple hotel operators confirmed the survival pressures behind these figures.

Built to Diaoyutai State Guesthouse standards for the 2016 Hangzhou G20 Summit, Jiutai Hotel now faces a radically altered market landscape. Mr. Wang of Junlan Hotel stated bluntly that rooms previously selling for 1,000 yuan during Golden Week now require active promotions at 500-600 yuan.

Mr. Wang of Junlan Hotel remarked, “We used to make money effortlessly, but now we must first figure out how to fill the rooms.” Mr. Tian of Liangzhu Homestay also revealed that premium rooms priced at 1,680 yuan before the pandemic now sell for around 1,000 yuan, halving pre-pandemic profit margins.

2.Survival Battle: Hotels' Desperate Innovations and Reluctant Compromises.

To survive the price war, the hotel industry has launched an unprecedented “self-rescue campaign.” Junlan Hotel's 20-yuan breakfast mystery box epitomizes this trend—after the buffet ends, customers can pay 20 yuan to pack leftover food in a box. “This isn't about profit, but recouping costs and attracting customers. If we don't find a way out, the hotel's GOP (Gross Operating Profit) will turn negative,” said General Manager Wang, revealing the industry's harsh reality.

Behind their opulent facades, hotels face severe cash flow challenges.

Beyond breakfast mystery boxes, many hotels have rolled out various low-cost promotional items, operating almost like neighborhood fast-food joints to stay afloat. Even so, the industry's overall profitability remains bleak. Junlan employee Lü Xia revealed that room rates and menu prices have dropped by at least 30%. While her salary hasn't been cut, raises are out of the question. Benefits like housing fund contribution bases have been reduced, and the company is adjusting its hiring strategies.

3.Double-Edged Sword: Industry Concerns Behind Consumer Benefits.

For consumers, price wars deliver tangible benefits: five-star hotels offer affordable rates while service quality actually improves.

Consumer Jiang Zaoru recalls that staff at five-star hotels used to be indifferent to extra requests. Now, when cleaning staff push beverage carts through the halls, guests can freely take bottled water—a clear sign of improved service.

Yet behind these “dividends” lies sustained pressure on the industry's human capital.

Service hinges on human resources. As overall industry profits shrink, employees' income growth and career advancement opportunities bear the brunt.

While some hotels maintain competitive salaries within the sector, widespread lack of pay raise potential and reduced benefits have become the norm. Long-term, teams plagued by low morale and high turnover struggle to deliver consistently high-quality service, ultimately jeopardizing consumers' sustained experience.

Even more concerning is the erosion of travel culture's diversity. Youth hostels, once symbols of openness, exchange, and exploration, are now in decline.

Hangzhou's international youth hostels have plummeted from a peak of 10 to just 2, with many young people now associating them with “cheap, unsanitary, and uncomfortable.”

As all lodging providers get caught up in the “value-for-money” race, unique, non-quantifiable values like host culture, local experiences, and community connections are being gradually discarded. Travel experiences are becoming increasingly homogenized.

4.Breaking the Deadlock: Cultural Empowerment Against Price Logic.

Facing industry challenges, some operators are exploring differentiated paths. At Liangzhu Homestay, General Manager Tian focuses on cultural value-added services, guiding guests to explore nearby cultural landmarks and organizing tea ceremonies and book clubs within the premises to serve specific demographics precisely. Meanwhile, Director Song of Hefang steadfastly champions the cultural identity behind lodging establishments, striving to reverse the negative perception of youth hostels.

These endeavors shine like faint glimmers in the darkness, using cultural power to counteract the pure logic of price. Yet under immense market pressure, can such persistence endure? Where will the industry's future ultimately lead?

The price wars in the hotel industry may appear as a tug-of-war between consumers, operators, and the sector itself, but they fundamentally concern the sustainability of travel quality and the preservation of cultural diversity. While we enjoy affordable accommodations, we should perhaps ask ourselves: Is this prosperity, achieved at the expense of the industry's future, truly worth it? Striking a balance between accessible pricing and the industry's healthy development is not only a challenge for hotel operators but also a public choice that concerns every traveler.