Iran war is boosting travel to secondary cities in Asia-Pacific

Trips to smaller “secondary cities” across Asia-Pacific are getting a boost this summer as travelers opt for destinations closer to home amid concerns over geopolitical tensions and rising costs.

Nearly half of global travelers are scaling back their travel plans, with many choosing domestic trips instead, according to Allianz Partners’ Global Travel Confidence Index. The survey of about 11,000 respondents, published in May, found that around 60% of respondents from China and India planned to travel domestically.

The trend is expected to fuel visits to Tier 2 and Tier 3 destinations such as Goa and Xiamen, which are popular with local travelers but remain less familiar to many international visitors.

Some travelers are keeping their international vacation plans but choosing destinations within Asia, Rajeev Menon, Marriott International’s president for APAC ex-China, told “Squawk Box Asia” on May 21.

“People have pivoted and shifted their plans to stay within Asia,” which is driving interest to up-and-coming places such as Phu Quoc, Vietnam, he said..

“A few years ago, it was really all about Phuket, Bali and maybe Langkawi,” he said “Now you’ve got many destinations within Vietnam that are getting hotter.”

China’s outbound market is also shifting — into Southeast Asia, he said.

“They may not be going to the Middle East or Europe,” he said. “But when you look at the numbers coming into Vietnam, coming into Malaysia … those numbers are pretty strong. Even Thailand – there’s bounce back from Chinese travelers.”

Menon said revenue per available room at Marriott’s India’s properties dropped after the Iran war began, as travelers with flights routing through the Middle East cancelled trips en masse.

However, as travelers readjusted their plans — choosing domestic and intra-regional trips — growth bounced back, he said.

“From May onwards, we are back to double-digit numbers, and as we look forward the pace remains pretty strong,” he said.

Demand for secondary cities in Japan is also strong, said Menon, adding that Marriott International operates hotels in 30 of Japan’s 47 prefectures.

Bookings beyond Tokyo, Kyoto and Osaka have been growing for years, with the travel booking website Agoda noting secondary city search interest grew the fastest in the first nine months of 2025 to Takamatsu at 63%, Matsuyama at 44%, followed by a 32% increase for Sendai, 27% for Okinawa and 26% for Sapporo.

But other cities — such as Shizuoka, Nara and Nagano — the host city for the 1998 Winter Olympics — are also attracting more visitors, according to Agoda, as Japan remains a top draw in the region.  

A survey by Visa shows among those planning to travel in Asia this summer, 1 in 4 are heading to Japan.

Rising travel interest in secondary destinations, however, is eroding one of their biggest drawing points: cheaper rates.

Growth in revenue per available room in secondary markets is outpacing some gateway cities, as demand grows faster than room supply, said Menon.

Higher revenue and room margins are encouraging investors to consider opportunities in well-connected secondary cities in Asia-Pacific, according to real estate services company JLL.

This is especially true in Japan and India, as prime assets in cities like Tokyo and Mumbai are increasing harder to come by, Marina Bracciani, vice president and hotels research lead at JLL in Asia-Pacific, said.

“Cities like Fukuoka, Sapporo, and Nagoya are increasingly on investors’ radar,” said Bracciani. “Primary markets in Japan have become relatively yield-compressed, which is naturally pushing capital toward regional cities that offer more attractive return profiles.”

Tier 2 and Tier 3 cities accounted for half of the hotel transactions in India in 2024, with transactions in Amritsar, Kolhapur, Shirdi and Tirupati. That share fell to 40% in 2025, though the quality of deals got a bump, including a luxury resort in Rishikesh and an upper-upscale resort in Goa.

“Across both countries, the underlying drivers are consistent: rising domestic travel, religious and cultural tourism [and] infrastructure development improving accessibility,” said Bracciani.

She added that many secondary destinations also offered untapped demand and a first-mover advantage for investors willing to enter early.

— CNBC’s Matthew Chin contributed to this report.

— Clarification: This article has been updated to clarify that Agoda’s data on the fastest-growing secondary cities in Japan relates to search interest.