2026Q3-MSI·Hotel Market Sentiment Report

Sentiment Weakens Again After Sustained Improvement, Pressure on Occupancy and Rates Slows the Recovery

In Q3 2026, the national Hotel Market Sentiment Index stood at -17, down 8 points from the previous quarter and marking a pullback after four consecutive quarters of improvement. The index reflects respondents’ expectations for year-on-year changes in hotel performance. A negative reading means that more respondents expect performance to decline than to grow. Although Q3 is traditionally the peak summer travel season, summer bookings got off to a slow start this year, putting considerable operating pressure on many hoteliers.

By indicator, the Occupancy index fell from 1 in Q2 to -9, indicating a shift from expectations of slight year-on-year growth to expectations of decline. The ADR and F&B Revenue indices were significantly lower than the Occupancy index. This suggests that, with demand recovery still unsteady, some hotels may continue to lower rates to maintain demand, limiting room for ADR and overall revenue growth.

Regionally, South China’s overall sentiment index rose to 2, making it the only region in positive territory. The Northeast, Southwest, and Northwest recorded overall indices of -38, -35, and -32, respectively. This indicates weaker year-on-year expectations for Q3 visitor volumes in long-haul tourism destinations, while the stability of demand recovery and the room for revenue improvement remain limited.

Sanya and Shenzhen Lead Sentiment Gains, ADR Pressure Weighs on Beijing and Guangzhou

In Q3 2026, performance expectations across China’s Tier-1 markets became more differentiated. The overall sentiment indices for Sanya and Shenzhen rose to 45 and 18, respectively, while Beijing, Shanghai, and Guangzhou recorded declines. Pressure was mainly concentrated in ADR and non-room revenue.

Sanya continued to lead the Tier-1 markets, with its overall sentiment index improving steadily since 2025. Its Occupancy, ADR, and Total Revenue indices reached 47, 33, and 54, respectively. Hotel performance in Sanya has remained strong this year. The return of some Japan-bound domestic travelers to destinations within China, together with growth in inbound visitors from Russia and other markets, has supported the local accommodation market. Shenzhen’s overall sentiment index rose to 18. Business demand generated by technology sectors such as artificial intelligence, together with inbound visitors and demand from sports and entertainment events, supported the local accommodation market.

Shanghai fell 3 points to -11, with the outlook broadly stable but slightly cautious. Beijing and Guangzhou recorded -19 and -17. In both cities, around 60% of respondents expected ADR to decline, although a similar share expected Occupancy to remain stable or grow. In Beijing, the Beijing International Automotive Exhibition in Q2 and growth in inbound tourism provided some additional accommodation demand. However, pressure on ADR, together with weaker F&B and meeting demand than last year, continued to weigh on respondents’ Q3 performance expectations.

Tier-2 Market Sentiment Weakens, ADR Remains Under Pressure

In Q3 2026, Qingdao’s overall sentiment index fell 8 points to -7 but remained among the strongest key Tier-2 markets. Inbound and leisure demand provided some support to hotel traffic, while weaker pricing and revenue expectations drove the decline. Its ADR and Total Revenue indices stood at -19 and -16, respectively. Kunming showed a similar pattern. Its Occupancy index remained positive at 14, while the ADR index fell to -38, indicating that hotels were relying more heavily on lower rates to support demand.

Xi’an and Chengdu recorded overall sentiment indices of -36 and -47, respectively, with cautious expectations across Occupancy, ADR, and F&B Revenue. In addition to weaker year-on-year demand, continued hotel openings have intensified competition. Both cities have ranked among China’s leading markets for new hotel supply in recent years. Chengdu added around 11,000 midscale and above hotel rooms in the first half of 2026, second only to Beijing. Respondents also expect entertainment and MICE activity in Q3 to be weaker than a year earlier. Together with the relatively high comparison base created by the 2025 Chengdu World Games, this has further weighed on the city’s year-on-year performance outlook.

Four-Star Hotels Face Greater Pressure, Caught Between Five-Star and Limited-Service Hotels

With the survey sample further refined, this quarter’s report introduces a new analysis of sentiment by hotel category. Based on star ratings, respondents are grouped into five-star hotels, four-star hotels, and three-star and limited-service hotels.

The overall sentiment index for both five-star hotels and three-star and limited-service hotels stood at -13. For five-star hotels, the Occupancy index was -5, while the ADR and F&B Revenue indices were -20 and -17, indicating greater pressure on room rates and non-room revenue. For three-star and limited-service hotels, the ADR index stood at -6, compared with -13 for Occupancy and -19 for Total Revenue. This suggests relatively limited expectations of rate declines, although accommodation demand and overall revenue remain under year-on-year pressure.

Four-star hotels recorded lower readings across all indicators, reflecting greater pressure from both ends of the market. Higher-value guests increasingly prioritize brand, product quality, and experience, while budget-conscious guests tend to prefer limited-service hotels with stronger price and efficiency advantages. Without a clear product proposition and target customer base, four-star hotels may struggle to attract higher-value demand through differentiated experiences or compete effectively on price and efficiency. As a result, Occupancy, ADR, and Total Revenue are all under pressure.

Inbound Demand Recovery Continues, Summer Domestic Leisure Outlook Weakens

The survey shows that leisure demand remains an important source of support for the hotel market. The Foreign Leisure FIT index rose slightly from -13 in the previous quarter to -9, indicating continued support from inbound travel facilitation measures. By contrast, domestic leisure sentiment weakened, with the Domestic Leisure FIT index falling from 8 to -9 and the Domestic Leisure Group index declining from -11 to -25. This was partly due to tighter travel budgets and a stronger focus on value for money. In addition, El Niño has added to uncertainty around extreme summer weather, including typhoons and high temperatures, weakening demand for long-distance and cross-regional travel and increasing uncertainty for group tour operations and destination reception.

Business and MICE demand showed little improvement. The Domestic Corporate, Foreign Corporate, and MICE indices stood at -26, -31, and -46, respectively, with more than 40% of respondents taking a cautious view. According to the National Bureau of Statistics, the non-manufacturing new orders index and selling price index remained below 50% at 48.0% and 48.4%, suggesting that demand recovery was still incomplete. Against this backdrop, hoteliers remain cautious about corporate travel, meetings and exhibitions, and group events.

Policy Support Sustains Market Confidence, New Supply Constrains Performance Recovery

This quarter, Local Tourism Development Trends and Central Government Policy remained relatively positive factors, with sentiment indices of 15 and 7, respectively. Respondents were optimistic about stronger policy support and improving tourism demand. The recently released or approved 15th Five-Year plans for building China into a leading tourism nation and expanding consumption provide policy support for the medium- to long-term recovery of the cultural and tourism market, covering high-quality tourism development, service consumption, broader cultural and tourism offerings, and an improved consumption environment. These measures are expected to support demand for leisure travel, entertainment and exhibitions, nighttime consumption, and inbound tourism, creating additional opportunities for hotel accommodation, F&B, and other spending.

By contrast, supply competition remains a key concern for existing hotels, with the New Competitive Supply Additions index at -60. According to the HOHI Data Platform, around 4,800 midscale and above hotels opened in mainland China in the first half of 2026, adding approximately 440,000 rooms. Although this was lower than the roughly 471,000 rooms added in the same period last year, the absolute volume remained high. As demand growth is still insufficient to fully absorb new supply, continued hotel openings are diverting demand from existing properties and intensifying price competition, limiting confidence in a near-term performance recovery. Other external factors, including Consumers’ Willingness to Spend, Market Economy Development Trends, Local/Global Stock Market Performance, and the Geopolitical Environment, also weighed on market expectations.

Summer Demand May Lift QoQ Occupancy, Lower ADR Limits RevPAR Recovery

The initial questions in this survey focused on year-on-year performance expectations to reduce the impact of seasonality on the sentiment index. To better capture hoteliers’ views on short-term market movements, we also collected actual monthly operating results for Q2 and asked respondents to forecast Q3 performance. The sentiment index is measured year-on-year, while the following operating forecasts are presented quarter-on-quarter.

From April to May, leisure demand was supported by spring breaks, the May Day holiday, and other public holidays. ADR remained relatively stable, keeping RevPAR at a comparatively high level. In June, as post-holiday demand normalized and the summer travel peak had yet to fully begin, both Occupancy and ADR declined, leading to a temporary fall in RevPAR. Performance trends for China and key cities are available on the HOHI Wechat Mini Program.

Hoteliers expect a moderate improvement in Q3 performance. National hotel Occupancy is forecast to rise 4.8% from the Q2 average, while ADR is expected to decline slightly by 1.6%, resulting in a 3.1% increase in RevPAR. The summer peak is not yet fully reflected in expectations, possibly due to later school holidays, more cautious travel decisions, and greater uncertainty around extreme weather. As the holiday progresses, family travel, study tours, and summer getaway demand may increase, supporting Occupancy. However, lower ADR is expected to limit the improvement in RevPAR.