Phu Quoc, Vietnam – March 20: People walking on Ba Keo Beach in Phu Quoc, Vietnam on March 20, 2026. The country welcomed approximately 21.2 million international visitors in 2025. This is a new record.
Alison Joyce | Getty Images News | Getty Images
Travel to smaller “secondary cities” in the Asia-Pacific region has picked up steam this summer, as geopolitical tensions and concerns over rising costs lead travelers to choose destinations closer to home.
Nearly half of the world’s travelers have scaled back their travel plans, with many opting for domestic travel instead, according to Allianz Partners’ Global Travel Confidence Index. A survey of about 11,000 respondents released in May found that about 60% of respondents in China and India were planning to travel domestically.
This trend is expected to drive visits to tier 2 and tertiary destinations such as Goa and Xiamen. Although these areas are popular with local travelers, they remain unfamiliar to many international travelers.
Some travelers are choosing destinations within Asia while maintaining their overseas vacation plans, Rajeev Menon, president of Asia Pacific (excluding China) at Marriott International, told Squawk Box Asia on May 21.
“People have pivoted and changed their plans to stay within Asia,” leading to increased interest in up-and-coming destinations such as Phu Quoc, Vietnam, he said.
“A few years ago, it was all Phuket, Bali and maybe Langkawi. Now there are many more popular destinations within Vietnam,” he said.
China’s outbound market is also shifting to Southeast Asia, he said.
“They may not go to the Middle East or Europe,” he says. “But if you look at the numbers entering Vietnam and Malaysia, the numbers are pretty strong. Even in Thailand, we’re seeing a backlash from Chinese travelers.”
Menon said revenue per available room at Marriott’s Indian properties declined after travelers flying through the Middle East canceled their trips en masse after the Iran war broke out.
However, growth has rebounded as travelers readjust their plans by opting for domestic and regional travel, he said.
“Since May, we’ve been back to double digits and continue to do so at a very strong pace,” he said.
Demand in Japan’s secondary cities is also strong, Menon said, adding that Marriott International operates hotels in 30 of Japan’s 47 prefectures.
Reservations for areas outside of Tokyo, Kyoto and Osaka have been increasing in recent years, with online search engine Agoda showing Takamatsu as the fastest growing destination in 2025 at 63% and Matsuyama at 44%, followed by Sendai at 32%, Okinawa at 27% and Sapporo at 26%.
However, Japan remains the top tourist draw in the region, according to Agoda, and other cities such as Shizuoka, host city of the 1998 Winter Olympics, Nara and Nagano are also increasing their numbers.
One in four people planning a trip to Asia this summer is headed to Japan, according to Visa research.
Higher Yield, More Investment
But the growing interest in traveling to secondary destinations is eroding one of its biggest attractions: low prices.
Menon said revenue growth per available room in the secondary market is outpacing some gateway cities as demand is growing faster than room supply.
Real estate services firm JLL says rising revenues and room margins are prompting investors to consider opportunities in well-connected secondary cities in the Asia-Pacific region.
This is particularly true in Japan and India, where prime assets are becoming increasingly difficult to come by in cities such as Tokyo and Mumbai, said Marina Bracciani, JLL vice president and hotel research lead for Asia Pacific.
“Cities like Fukuoka, Sapporo and Nagoya are increasingly attracting investor attention,” Bracciani said. “With yields in Japan’s major markets relatively compressed, capital will naturally be concentrated in regional cities that offer more attractive return profiles.”
Secondary and tertiary cities accounted for half of India’s hotel transactions in 2024, with transactions seen in Amritsar, Kolhapur, Shirdi and Tirupati. The proportion fell to 40% in 2025, but the quality of deals improved, including luxury resorts in Rishikesh and luxury resorts in Goa.
“In both countries, the underlying drivers are consistent: increased domestic travel, religious and cultural tourism (and) improved accessibility through improved infrastructure,” Bracciani said.
He added that many secondary destinations also offer untapped demand and provide first-mover advantage to investors willing to get in early.
—CNBC’s Matthew Chin contributed to this report.
