In conjunction with the rapid development of tourism sector in Malaysia, hotel industry has also advanced. Types of hotel include luxury hotels, resorts, and budget accommodation. This study aims to investigate the challenges and potentials faced by the owners of budget hotels. To achieve the objectives, a case study was conducted which focused on the challenges and potentials encountered by the owners of Mesra Hotel, a budget hotel located in Alor Setar, Kedah, Malaysia. The data collection was carried out through personal interviews. As evident in the extant literature, findings reveal that the difficulty to obtain external financing, lack of competent employees and financial as well as management skills are the major problems faced by the owners of this hotel. It is hoped that the findings will provide a better input for the owners and related authorities in order to ensure the successfulness of budget hotel industry in particular and Malaysian tourism sector in general.
