• South-east Asia welcomed 144 million international visitors in 2025, yet development capital is concentrating in premium and luxury products while the region’s growing middle class drives the largest volume of future demand
• Owners are diversifying into secondary destinations, using branded residences to bring cashflow forward and lifestyle concepts to lift returns without the capital burden of traditional luxury builds
• Developers say the winning formula now sits where consumer demand meets real estate returns, with localised design replacing one-size-fits-all brand standards across the region

The guest South-east Asia’s hotel owners are building for is not necessarily the one most likely to walk through the door. Development pipelines across the region are skewing towards wellness, luxury and lifestyle products, even as the fastest-growing demand pool, the regional middle-class holidaymaker, remains underserved in the midscale segment.

The macro picture explains the confidence. The region welcomed 144 million international visitors in 2025, a 19 per cent increase from 2024, with Malaysia, Thailand and Vietnam leading the numbers, according to Bryan Chan, vice president, development, South East Asia and Korea, IHG Hotels & Resorts.

“Despite ongoing global geopolitical tensions, travel to the region continues to be highly resilient, supported by expanding GDP, a growing middle class, and the fundamental desire to travel for leisure, business and to stay connected with family and friends,” Chan said. “Demand is also consistently outpacing supply in key segments, particularly in premium and luxury, which creates attractive opportunities for owners and sustained development momentum across the region.”

Selective optimism
Andrew Shaw, chief development officer, Centara Hotels & Resorts, described his outlook as “selectively optimistic”, noting that growth is not uniform. “The strongest opportunities are in frontier and emerging destinations, while mature markets are becoming more competitive and, in some cases, oversupplied,” he said.

Thailand remains a regional heavyweight, but Shaw pointed to rate pressure in Bangkok and Phuket caused by high levels of supply, forcing developers to think harder about value creation, product differentiation and secondary destinations. Vietnam, he said, is “the clearest high-growth story”, with coastal corridors such as Cam Ranh and Ho Tram drawing significant attention on the back of improving infrastructure and rising leisure demand. The Philippines interests him for its strong domestic base and the depth of employment tied to tourism, while in Indonesia the conversation is shifting from chasing volume to capturing higher-spending luxury and experience-led travellers in Jakarta and Bali.

Owner priorities have hardened accordingly. “Margin protection is the first priority. Even where average daily rate and occupancy have recovered, operating costs remain a pressure point. Owners are therefore looking closely at gross operating profit, not just revenue,” Shaw explained. Labour shortages are pushing operators towards automation, upskilling and cross-training to improve staff retention.

Asked whether owners’ ideal hotel types match what the market actually needs, Shaw was blunt: “Only partly. Owners are broadly aligned with demand at the premium end of the market, particularly in wellness, lifestyle, and experiential hospitality. But there is still a noticeable gap in the midscale segment, where South-east Asia’s growing domestic middle-class is likely to drive much of the volume growth.”

He added: “Owners are understandably building for the most profitable guest: the luxury wellness traveller. But the most common guest may be the regional middle-class holidaymaker. That creates a strategic tension. The premium strategy protects margins today, but it may underserve the largest long-term demand pool.”

Branded residences and secondary destinations
Where owners are diversifying, branded residences are doing much of the financial engineering.

Xavier Grange, global chief development officer for Sofitel, Emblems, MGallery & All Luxury Brands Europe-North Africa at Accor, said the model continues to gain momentum across the region.

“This model allows owners to diversify revenue streams by combining hospitality operations with residential sales. It can also help accelerate project financing and enhance the overall positioning of the asset, particularly in emerging destinations where brand recognition plays an important role,” Grange noted.

Shaw shared the enthusiasm on capital grounds.

“Branded residences allow developers to sell units off-plan, bring cash-flow forward, reduce project risk, and help fund the hotel component. In today’s capital environment, that structure is highly attractive,” he said.

Localised concepts for regional demand
The other structural shift is away from standardised brand templates. Grange stated that the ideal hotel type is no longer a one-size-fits-all concept. “Japan requires a very different approach from Thailand, and Indonesia does not operate in the same way as Vietnam,” he said. “The market is less about identifying a single ideal format and more about adapting each project to its local context, with brands providing structure and clarity rather than a uniform model.”

Shaw connected localisation directly to shifting source markets, with owners reducing reliance on longhaul Western travellers in favour of intra-ASEAN, Chinese and Indian demand. “Localised design, distinctive F&B concepts, and culturally grounded experiences are becoming more important for experience-led guests,” he said, highlighting Vietnam’s rising appeal among younger, self-booked Chinese leisure travellers, alongside growing demand across Indonesia and the Philippines.

Armand Steinmeyer, vice president, development, South-east Asia at Radisson Hotel Group, explained: “We see South-east Asia as an integrated region. It is a nexus for tourists coming from outside, but intra-regional travel will become the key driver. The region sits between India and China, and that will continue to drive new destinations.”

Chan pointed to brands being used to transform “micro-locations”, citing the recent opening of Kimpton Naluria Kuala Lumpur in Tun Razak Exchange, the Malaysian capital’s new downtown district. “Owners today are increasingly focused on driving stronger returns through differentiated, efficient and future-ready assets,” he said, adding that distinctive concepts with F&B and social components appeal to both travellers and local communities.

The lifestyle bet
Lifestyle and collection brands are where owner economics and traveller preferences most visibly converge. Chan cited IHG’s Vignette Collection, which has opened Reve Ho Chi Minh City and will soon welcome Mangala Estate Kuantan and Vaagali Maldives. “It offers one-of-a-kind stays that weave responsibility, community and locality together,” he said.

Shaw argued the segment can bridge the gap between owner objectives and the volume market. “Lifestyle hotels avoid some of the space-heavy requirements of traditional luxury hotels, while creating high-margin social spaces, local food concepts and curated experiences,” he noted. “Done well, they can lower capital cost per key and still command upscale rates.”

Steinmeyer, meanwhile, cautions that fashionable segments carry their own risk. “One thing that all hotels and operators have to take into consideration is that there are cycles. Trends and lifestyle have a shelf life,” he said. “Not every location needs a lifestyle brand. When a market is more complex, there is a need to differentiate segments, and ask questions such as whether it resonates with ownership and brings value.”

Shaw also warned that strong hotel performance does not automatically translate into an active transaction market, with sellers pricing assets based on strong cashflow while institutional buyers stay cautious on persistently high interest rates, producing more recapitalisations, restructuring and creative joint ventures instead of outright sales.

For Chan, the resolution of the region’s strategic tension is ultimately straightforward.

“The market will dictate what gets built. What is built by hotel developers is what sits at the intersection point between consumer needs and strong real estate investment returns,” he concluded.