Tourism and hospitality industry features large numbers of small accommodation businesses (SABs) such as B&B, home stay, and guesthouse. These special forms of accommodation are regarded as in contrast to conventional hotels, and thus are named as “quasi-hotels” (Slattery, 2002). SABs represent the core service and provide a large share of accommodating capacity in most rural destinations, and play a central role in rural tourism development, poverty relief and rural revitalization (Komppula, 2014). Due to a growing market demand in recent decades, most SABs have saw rapid growth in business size, e.g. room number, investment, facilities (Turner, 2011). This trend has been observed in various contexts (Huang, 2008; Iorio and Corsale, 2010; Komppula, 2014; Rogerson, 2004). Scholars envision that with boom of e-business and sharing economy platforms (e.g. Airbnb), SABs will continue to expand in scale and thereby reshape future dynamics of the hospitality industry (Guttentag, 2015; Sigala, 2015). Growth of SABs occurs on the early stage of their business lifecycle, and represents a transition of rural home to commercial business (Lynch, 2003, 2005). Therefore, it has both economic and socio-cultural consequences which are worthy of in-depth investigation. A literature review reveals that there is a disparity of attitudes regarding SAB growth and its impacts. Those who are supportive appreciate the economic significance of SABs as a typical form of indigenous tourism, and expect their growth to bring about more financial reward to rural households and boost local economy (Ateljevic, 2007; Goodwin and Santilli, 2009). Other scholars, in contrast, insist that SAB development should be advocated not only based on income generation, but also on preserving its attractiveness such as traditional lifestyle, quality service and memorable experience (e.g. Shaw and Williams, 1994). Increased SAB business scale, however, may bring about negative changes (e.g. lagged service quality control, eclipsed authenticity, and weakened experiential elements), and thus cause damage to tourist experience and further to destination competitiveness and sustainability in the long-run (Fuller et al., 2005). The afore-mentioned disparity of views alludes to a zero-sum game regarding SAB growth between the short-term economic benefits and long-term sustainability, between commercial value and authenticity, and between financial rewards and rural tourist experience. If this holds for true, then SAB entrepreneurs may face a dilemma when growing their businesses, in terms of whether to satisfy investors (better financial performance) at the cost of satisfying tourists (quality, enjoyable and authentic experience), or the other way around. Despite these suspicions and disputes, few empirical research has been conducted to examine the exact effects of SAB growth. This study aims to fill this gap by investigating the influence of SAB size increase on guest experience and financial performance in the context of rural China. Hypothesized relationships were built based on previous research, and tested with a hierarchical data set comprising 188 rural SABs and 873 guests in five villages in the north of Zhejiang Province. Different effects of SAB size increase were compared and contrasted between financial performance and guest experience.