Struggles persist for Homestay businesses in China as operators express concerns over business decline
In the bust phase of a classic boom-and-bust cycle, China's private holiday accommodation sector is currently grappling with a surge in supply, falling guest spending, and thinning bookings. This sector, which includes bed and breakfasts, homestays, guest houses, and villa rentals, had over 400,000 businesses in operation last year.
The boom in the sector was short-lived, lasting only a couple of years, and was primarily driven by pent-up demand post-Covid-19 pandemic. However, the rapid growth has led to an oversupply of accommodations, causing a downturn in demand for many operators.
Chen Mei, who has been leasing private holiday accommodation in Guangdong province for four years, is one such operator experiencing a decline in demand. She regrets getting involved in the industry due to the profit squeezes and, if given the chance, would not have invested in it.
Similarly, nearly 60% of operators in the sector expressed regret for entering the market. One operator lamented that despite investing millions, she was only earning a housekeeper's wage from her homestay.
Despite the difficulties, the sector generated 42.27 billion yuan (US$5.92 billion) in revenue from bookings last year. However, around 60% of these businesses were established for three years or less, indicating a high turnover rate.
It's worth noting that the name of the person who invested millions in a homestay and feels worthy of being a housekeeper, as mentioned in a 2023 report by the think tank and data provider Fastdata, remains undisclosed.
As Chen Mei scales back her operations, many other operators are also rethinking their strategies in the face of the current challenges. The sector's future remains uncertain, but one thing is clear: the boom-and-bust cycle has taken its toll on China's private holiday accommodation industry.
