During the week-long National holiday, occupancy rates at about 3,000 budget hotels in Beijing reached 90 percent, according to the municipal tourism bureau. Major tourist destinations such as Shanghai, Qingdao, Hangzhou and Ningbo reported similar rates.

Jinjiang Inn, China's largest budget hotelier, had opened 139 hotels with 19,812 rooms by June this year and has almost doubled capacity each year for the last three years.

Other domestic operators like Home Inn and Motel 168 are expanding through franchising and certified operations, which are key expansion models for budget hotels in China.

"The budget hotel boom shows that recreation tourism is gaining popularity among ordinary Chinese people," said Wei Xiao'an, a researcher with the Tourism Research Center of China's Academy of Social Sciences.

According to Wei, budget hotels are a relatively new concept in China and do not yet have an official definition, but industry insiders say budget hotels have "a two-star lobby, three-star rooms and four-star beds." The lack of a precise definition means that the total number of budget hotels is unknown. According to the National Tourism Administration, 60,000 of the nation's 260,000 hotels, with a combined 3 million rooms, can be termed budget hotels.

"Generally, budget hotels only provide bed and breakfast. They are as good as three-star hotels, but have no resplendent lobby, no conference rooms or entertainment centers. Some don't even have dining halls," said Wei.

"Unlike hostels and boarding houses, budget hotels have to be part of a chain that offers standard facilities and services," added Wei.

According to Zhang Zhijun, an official with the Beijing Tourism Association, budget hotels cannot be compared with three-star hotels because there are no separate statistics.

However, budget hotels are generally cheaper than three-star hotels in similar locations. Rates range from 100 to 200 yuan (US$12.5 to 25), 15 to 30 percent down on three-star hotel rates, Zhang said.

"All I need when I'm away from home is a clean bed and a convenient location. For me, budget hotels are good enough," said a 26-year-old girl called Wang, who earns 4,000 yuan (US$500) per month in a Beijing consulting firm.

Budget hotels usually target people aged 25 to 35 with a monthly income of 3,000 to 5,000 yuan (US$375 to 625), said He Hongzhang, CEO of burgeoning Top Star, a domestic budget hotel chain that hopes to open 1,000 outlets by 2015.

International hotel groups like Super 8, IBIS, Amersino and Holiday Inn Express are also licking their lips at the business opportunities. Super 8, a U.S.-based budget hotel group, has just opened its 30th franchise hotel in Beijing and is planning to open another 68 hotels in China by the end of the year.

China's domestic hotel market is expected to boom in the lead-up to the 2008 Olympic Games and the 2010 World Expo. Beijing is expected to receive 4.63 million tourists during the Olympics.

Industry analysts are predicting a rosy future for budget hotels as their attractive prices and satisfactory services continue to win the hearts of tourists.