5.6 Billion Tourist Visits Still Can’t Support 380,000 Homestay Businesses

Market paradox: booming demand, sinking returns

China’s domestic tourism recovery is undeniable — it has been reported that 2025 saw more than 5.6 billion domestic trips — yet the country’s homestay sector is caught in a painful contradiction. According to business registry data, there were roughly 383,000 homestay enterprises nationwide at the end of 2025, and platforms such as Tujia (途家) and Muniao (木鸟民宿) have publicly reported stronger bookings and higher average spend over the Lunar New Year. Why then are closures and transfers proliferating, and why are once‑celebrated high‑end projects quietly disappearing?

Oversupply, thin margins

The numbers show the cause. The industry added about 86,000 new registrations in 2025 even as roughly 29,000 businesses were cancelled or had licences revoked — a rapid churn that underscores accelerated market consolidation. Reportedly, average occupancy rose to a post‑pandemic high of 36% by October 2025, but average daily rates plunged to RMB 367, down roughly 30% year‑on‑year. The result: “high turnover, micro profits.” Investors poured capital into the sector — it has been reported that 2024 financing reached about RMB 4.49 billion — yet scale has not translated into sustainable profitability.

Structural strains: regulation, sameness, competition

Analysts point to three structural headaches: patchy regulation, homogenization, and brutal cross‑sector competition. Authorities are tightening oversight — one Sanya operator was fined RMB 350,000 and had its business licence revoked — but enforcement remains uneven across public safety, health and environmental jurisdictions. Homestays have also lost their cultural edge to cookie‑cutter “Instagram” interiors; the report argues that the real asset of a homestay is local and owner‑driven authenticity, not a replicated aesthetic. Meanwhile, hotels (including chains backed by platforms such as Ctrip (携程)) and a booming camping market are squeezing homestays from both ends. Can a single cottage‑industry model survive between standardized hotel chains and low‑cost outdoor experiences?

Where the sector can go next

The consensus recommendation is a return to roots plus professionalisation: deepen ties to local culture, revive “host culture,” and adopt digital operations and brand standards where appropriate. Major players and tourism arms like New Oriental (新东方文旅) and boutique operators such as Songtsam (松赞) are already repositioning around branded, culturally anchored offerings. The shake‑out looks painful today, but if operators can combine local authenticity with smarter management and clearer regulatory frameworks, homestays may yet emerge as niche, resilient destinations rather than casualties of overexpansion.