Chinese investors are eyeing local hotel investment opportunities to continue expanding the market while Beijing continues to restrict overseas investment, according to David Marriott from JLL's hotels and hospitality division in China. Opportunities for foreign investment in China's hotel market have decreased in response to the growing domestic interest.

China's State Council and the National Development and Reform Commission restricted investment in certain industries, including real estate and hotels, last August. JLL data showed that China’s market had close to $4 billion in hotel sales last year with most of purchases made by Chinese companies with Beijing scoring the highest number of transactions last year. These included Guangzhou R&F Properties' acquisition of 77 hotels from Dalian Wanda Group in a $2.9-billion deal.

Excess hotel supply is helping to boost liquidity, driving some developers to consider converting hotels into office or residential buildings to gain yield, Marriott said in a statement. The sale of mixed use developments that require a hotel on the property has also led to excess supply and decreased trading performance, particularly in Tier-2 and Tier-3