This paper deals with the impact of competition on the tourism network in China. It identifies the supply and demand conditions among service providers, tour operators and tourists that have led to the zero-fee tour and then deals with the impact of this intense price competition in terms of the reduction in product quality and degrading of the whole network. The paper also deals with various attempts by local governments and others to curb the zero-fee tour. It points out that price restrictions have worked in a destination that has established a brand value and, thus, has become a differentiated product. In concluding, the paper deals with the supply reductions that are needed to reduce price competition in various segments of the tourism network.