Statistics from the China National Tourism Administration show that in the fourth quarter of 2013, the average daily rack rate for five-star hotels in China decreased by 0.05 percent year-on-year, while the average occupancy rate was down by 5.23 percentage points.

"It was a very tough year for China's hotel industry," said Zhang Rungang, director of the China Tourist Hotels Association. He was pessimistic about this year, as well. "The market situation will not change in 2014."

InterContinental to open more hotels in China

Top 10 picks for global travelers

Zhang said that a main reason for the market decline was the shrinking of high-end consumption paid for with public funds, as the government released new regulations to combat corruption and extravagence.

The industry must make changes to survive, he added.

By July 2013, high-end chains comprised 56 percent of China's total hotel rooms, according to STR Global, an international industry data and analysis provider.

On the other hand, international brands are not just eyeing the domestic market; they also are encouraged by the huge outbound travel figures from China.

Outbound tourism totaled 98 million trips in 2013 and will exceed 100 million this year, according to the China Tourism Academy.

"We will take advantage of this opportunity," said Hilton's Nassetta.

In order to attract more Chinese guests, Hilton launched a project called Huanying (Welcome) in 2011. The project includes a Chinese language service, Chinese restaurants, music and other services tailored especially for Chinese customers.

Marriott also is coming up with "Chinese-ready hotels" in cities that attract many Chinese tourists, such as New York City and Vancouver. These sites provide Chinese consumers with familiar food and Mandarin-speaking staff to better meet their needs.

Arne Sorenson, president and chief executive officer of the company, summed it up by noting that the whole world is competing for the Chinese tourist.

Top 10 overseas travel destinations for Chinese riches

Top 10 overseas destinations for mainland tourists