Horwath HTL Data Reveals Asia-Pacific Hotel Development Focuses Beyond Gateway Cities
New analysis from Horwath HTL demonstrates that most Asia-Pacific hotel deals now occur outside primary urban centres. This trend, consistent since 2019, shows a preference for property conversions and a rise in upscale developments within secondary markets. The data challenges traditional perceptions of regional hotel growth.
Decentralisation of Hotel Investment Across Asia-Pacific
Asia-Pacific hotel development is increasingly targeting locations beyond traditional first-tier gateway cities, according to Horwath HTL. Data from the firm's Deal Signing Report shows that between 84 and 88 per cent of all signed hotel deals across the region since 2019 have been in secondary or tertiary markets.
This pattern holds true for the current year, with the first quarter of 2026 revealing 85.9 per cent of deals in these non-gateway areas. Matt Gebbie, Horwath HTL's Director for Pacific Asia, notes that despite this clear trend, industry discussions often remain centred on major urban hubs.
Horwath HTL aggregates deal signings and hotel openings from major international and regional chains, providing a comprehensive view of branded hotel stock across the continent. This shift represents a significant change in investment strategy.
Conversions Gain Ground Over New Builds
The report also highlights a steady decline in new hotel construction in secondary cities. While new builds still comprise the majority, their share has fallen from approximately 80 per cent in 2019 to around 60 per cent in 2025 and the first quarter of this year. This reduction has been consistent, showing a quarterly decrease from 82 per cent to 58 per cent.
Conversions of existing properties are steadily eroding the new-build dominance. Additionally, adaptive re-use, transforming non-hotel buildings like apartments or offices into hotels, is growing. This trend is particularly evident in China. Rising construction costs are driving developers to consider conversions more frequently.
Developed markets like Australia, Malaysia, New Zealand, and Thailand show a higher proportion of conversions compared to countries such as Pakistan, Cambodia, and Vietnam.
Upscale Segment Expansion and Regional Hotspots
The upscale and luxury hotel segments are expanding significantly in secondary and tertiary cities. Their combined share of deal signings in these markets has nearly doubled, rising from about 20 per cent in 2019-2020 to almost 35 per cent currently. Regionally, India has seen a 452 per cent increase in deal volume in secondary and tertiary cities when comparing 2025 with 2019.
Japan's regional cities experienced an 89 per cent rise, and China saw a 71 per cent increase. South Korea grew from a single deal in 2019 to 14 deals. Thailand's key secondary cities, Phuket, Pattaya, and Krabi, now account for the bulk of the nation's new hotel agreements.
Growth in Special Economic Zones (SEZs) across China, India, Indonesia, and Vietnam also drives demand, particularly due to 'China Plus One' manufacturing policies.
Implications for Industry and Travellers
This decentralisation of hotel development carries significant implications for both the travel industry and consumers. Investors and developers are increasingly looking beyond saturated gateway markets for growth opportunities. The rise of conversions suggests a more sustainable and cost-effective approach to expanding hotel inventory.
For travellers, this trend means a broader selection of accommodation options, including more upscale properties, in destinations previously underserved by branded hotels. Business travellers will find new lodging choices in emerging economic and industrial zones.
This shift demonstrates a maturing Asia-Pacific travel landscape, where diverse regional hubs are gaining prominence. The industry will need to adapt marketing and distribution strategies to reach these evolving secondary and tertiary markets effectively.
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