Budget hotels are a relatively new concept in China. In terms of the mode of development, leasing has been popular among the company-run budget hotels. This study explores the factors that influence company-run budget hotels in China to choose leasing (under company-run operations) as a vehicle to expand their budget hotel business instead of franchising or acquisition. This is despite the fact that the literature identifies leasing as a short-term approach. Using a case-study approach, a questionnaire was developed to collect data from interviewees of four budget hotel firms with domestic and foreign affiliations in China. Factors considered as important by the interviewees included costs (including energy costs), high speed of expansion, standardization, government policies, uncertain future and rising property rent. The findings suggest that the budget hotel firms' development strategies may not be suitable in the long term, which need to be altered if these hotels wish to benefit from sustained growth.