The economy hotel sector in China is now undergoing a stage of consolidation. Two years ago, the ready availability of money in the sector -- from initial public offerings, venture capital and bank loans -- caused asset prices to soar. Land and property prices surged and costs rose sharply, reducing the profit margins of economy hotels. It was a classic bubble scenario, but the worst is over, according to speakers at the China Hotel Investment Summit, held in Shanghai in late April. The strongest hotel chains are still expanding fast, although more cautiously than before, while some unbranded local hotels are beginning to fail.

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