In an interview with TTG Asia, Matt Gebbie, director for Pacific Asia at Horwath HTL, discusses the share of Asia-Pacific hotel deals signed outside gateway cities, the steady shift from new builds to conversions, and the move towards upmarket products in secondary cities
Horwath HTL’s Deal Signing Report shows 84 to 88 per cent of every signed hotel deal across Asia-Pacific since 2019 has landed outside the roughly 20 true first-tier gateway cities. What is the industry still getting wrong when it talks about hotel development in this region?
To qualify everything I say, we have been running our own deal signing report for more than 10 years, since 2015. All of the major international chains and many of the regional chains provide us with their deal signings and hotel openings quarterly; we aggregate that information and we feed it back to them. It is not every hotel in the market and it is just the branded stock, but it is a very good read on an increasingly important group of hotels as the brands proliferate.
What that data shows is that in the last 15 years, about 85 to 90 per cent of hotel deals signed across Asia-Pacific are outside the top 20 first-tier gateway cities – so about 85 per cent. It is pretty huge. The conversation is still framed around the gateways, but that is not where the majority of deals are being done.
In Thailand specifically, which cities carry that volume?
Top tier in Thailand is just Bangkok. If we look at the three biggest cities in Thailand over the last six years – 2019 to 2025 – they are Phuket, Pattaya and Krabi. That is where the bulk of the deals in Thailand are happening in terms of secondary and tertiary cities, particularly Phuket and Pattaya for 2024 to 2026.
Deal volume in secondary and tertiary cities is up 452 per cent in India, 89 per cent in Japan’s regional cities and 71 per cent in China, comparing full-year 2025 with 2019. South Korea went from a single deal in 2019 to 14. Is 2025 an outlier, or has the base moved?
The base has moved. 1Q2026 tells us this is not a 2025 blip, because the secondary-city share is still sitting at 85.9 per cent this quarter. What is striking is how uniform it is across very different markets. India is the standout on percentage growth, but China is running well over a thousand secondary-city deals a year since 2021, so the absolute weight is there too.
New builds still dominate your secondary-city data, but the share has fallen from around 80 per cent in 2019 to around 60 per cent in 2025 and 1Q2026. Walk me through what that decline looks like quarter by quarter.
New builds are still dominating the secondary-city deal data, however, it is reducing. It has gone from 82 to 79, to 75, to 71, to 63, to 58 quarterly. It is a steady decline, but it has never gone back up again. Conversions have been steadily eroding the new-build share in the secondary cities for six straight years.
Conversions of existing hotels are growing, but so is adaptive re-use – actual non-hotels converted into hotels, whether they are apartments or offices. That is a small percentage now, but it is rising, and particularly in China. When we collect the data on deal signings and hotel openings, one of the questions we ask is whether it is a new build, a conversion or an adaptive re-use. Adaptive re-use never really got ticked before. It is increasingly ticked now. As construction costs increase, people are looking at conversions more readily.
Your country splits – by country (full period 2019-2026) – show real spread: Pakistan at 92 per cent new build, Cambodia 81 per cent and Vietnam 73 per cent, against the Maldives at 42 per cent, New Zealand 50 per cent, Australia and Malaysia at 52 per cent and Thailand at 55 per cent. What separates those two groups?
The conversions are more in the developed markets. If you look at Australia, Malaysia, New Zealand and even Thailand, there is a heavier proportion of conversions than there are in countries like Pakistan, Cambodia, the Philippines or Vietnam. Which is probably not a big surprise.
Narrowing to just 2024-2026, the shift toward conversions is even starker in mature/leisure markets – Australia flips to only 34 per cent new-build (56 per cent conversion), Thailand and Japan both drop to around 41 per cent new-build. Meanwhile China, India, Indonesia and Vietnam still sit in the 60 to 63 per cent new-build range, consistent with them being earlier-stage growth markets.
In the middle is where it gets interesting for the 2019-2026 data. There is a proliferation of new hotels in secondary cities in the new economic and commercial zones. The ratio of conversions versus new builds for this group sit around the middle of the pack: China (71 per cent new builds), India (68 per cent), Indonesia (69 per cent), Japan (60 per cent) – these four countries all indicate growth in those industrial Special Economic Zone (SEZ) type regions.
Vietnam, Indonesia and India’s interiors also particularly demonstrate more of that SEZ type of new destination being created out of the China Plus One policies that some of the conglomerates have. It is driving demand for rooms.
In 2019 and 2020, upscale-and-above accounted for about 20 per cent of secondary-city signings, midscale and upper-midscale for around 45 per cent, and economy for roughly 10 per cent. Where does that mix sit now?
Upscale and above have nearly doubled their combined share. It is now nearly 35 per cent, just in the secondary and tertiary cities, which makes it even more interesting, because it used to be that the secondary and tertiary cities were very midscale. Economy has fallen to around six per cent, luxury has tripled, and upscale has grown to nearly 25 per cent. Upper-midscale is still the single largest segment, so it has not disappeared, but the tail of the market is growing much faster than the base. It is certainly a shift upwards.
What is funding that shift up the chain scale?
Wealth. Particularly if you look at China and India, domestic tourism is certainly driving the growth in the secondary cities. There is obviously a lot of growth in manufacturing in India, more so than perhaps China over the last 10 years, but wealth is what is driving that reach out into the secondary and tertiary markets. Business travel is part of it, of course, because there are many cities in India and China you do not go to for leisure; you go for business.
But it is actually quite interesting how many of these growth markets are resort and leisure based as well.
Can you give me a concrete example of the kind of city that is pulling both streams?
Batam in Indonesia is arguably both, because it has its SEZs but it is also a leisure destination. In Thailand, you could argue Pattaya has the Eastern Seaboard and a bit of manufacturing, but it is also a big leisure destination. In India, there is a little more industrial weighting, but you have still got Jaipur and Goa driving quite a lot of new supply.
Danang and Phu Quoc are the biggest two secondary markets in Vietnam. Danang is becoming quite a hub for digital nomads, tech and start-ups. Anyone that does not want to favour either Hanoi or Ho Chi Minh City is setting up business in Danang. Phu Quoc is purely leisure, but they are building very large hotels there, so those will certainly be MICE destinations for you going forward, post-APEC next year. Penang in Malaysia has a bit of both, with manufacturing on the mainland and on the island alongside the leisure business. Cebu in the Philippines is quite similar to Danang in that it is getting that digital nomad and tech connectivity reputation.
What should hoteliers and owners take from the hybrid pattern, and does brand architecture make adaptive re-use easier to execute?
From a hotel perspective, if we can get hybrid destinations, that is much better than having one or the other, because then you get all-week occupancy. You can play both markets. You end up with something like Bali, which appeals to corporate and MICE, but also to leisure, as opposed to somewhere like Jakarta, which you could argue is purely a business town, so its weekly occupancy struggles because of the lack of leisure demand.
On brands, using the collection brands, which the groups all have many of, certainly makes adaptive re-use a possibility. For the hard brands, with the lack of flexibility, adaptive re-use is far more difficult. But with something like Curio, the collection brands make rebranding an office into a hotel easier.
Which cities are on your watch list over the next 12 to 24 months?
Chengdu, Chongqing, Wuhan and Kunming in China, which are already large enough to be considered secondary-gateway markets in their own right, alongside Hangzhou, Suzhou, Xi’an and Nanjing. Below that tier, the fastest emerging momentum on a smaller base is in Urumqi, Guiyang, Dali, Harbin, Sanya, Xishuangbanna and Kashgar. Outside China, I would watch Jaipur, Goa and Indore in India, Danang in Vietnam, and Bali and Batam in Indonesia. The 85 per cent of growth outside the key cities is amazing, and it seems to be quite uniform, and that change from new builds to conversions is going to keep reshaping where the capital lands.
