The fire broke out at 1:37 a.m. at the Ruyi Inn in the Dukezong Ancient Town, where most houses are made of wood, a factor which added difficulties to firefighting, said a local government spokesman at a press conference.

Around 2,000 people, including local firefighters, soldiers, police and residents, have participated in the rescue work. Over 2,600 people were evacuated from three neighborhoods of the town. No casualties have been reported.

Dukezong town in Shangri-la County is known for its well-preserved Tibetan dwellings, and is a popular tourist destination. It suffered significant damage in the blaze.

Local officials say the reason is the wooden structures of most houses here and the tight spaces in between them. This also made fighting the fire even harder. The dry climate and strong winds also contributed.

However, many locals are saying they found most fire hydrants in the ancient town had no water at all when the fire broke out.

Local government has been vigorously promoting the tourist industry since the county was officially renamed Shangri-la in 2001. Tourists swarm in to appreciate the beauty of the famous trading hub on the ancient Tea-Horse Route in southwest China.

But with limited capacity and space, the town now grapples to accommodate more visitors and measures to prevent fire are often ignored, Li Gang, director of cultural relics protection department of Deqen said.

He suggested to better planning the layout of the town, for example, to move some high-risk businesses, in terms of fire prevention, out of the core area of the town.