Abstract: Based on literature review, this study sampled managers and employees in 7-Days Inns and Home Inns in Guangzhou as object. By using Structural Equation Model (SEM) and knowledge creation as a mediator variable, we build a model of the influence of organizational learning mechanism on dynamic capabilities. Main results are as follows. In economy/budget hotels, (1)there is a positive interaction between knowledge transfer and knowledge storage; (2) both knowledge transfer and knowledge storage positively influence knowledge creation; (3) knowledge creation has a positive effect on dynamic capabilities; (4)there is no evidence to show that knowledge transfer and knowledge storage positively affect dynamic capabilities directly, unless via a mediator variable such as knowledge creation; (5) organizational learning taking place among both managers and employees has significant influence on knowledge creation as well as dynamic capabilities, while compared with employees, knowledge creation that happens among managers has greater influence on dynamic capabilities. Not only does the study make contribution to theories on relationship among organizational learning, knowledge creation and dynamic capabilities, but also expands economy/budget hotels area of research into dynamic capability field, providing a theoretical direction for economy/budget hotels building learning organization, enhancing dynamic capabilities and acquire sustained competitive advantages.