Hospitality Development in Secondary Markets: Where’s the Next Big Opportunity?
The hospitality industry has long centered on primary markets—major metros like New York, Los Angeles, and Chicago have dominated hotel investment, commanding high ADRs (Average Daily Rates) and consistently strong occupancy rates. However, a shift is underway. Investors and developers are increasingly eyeing secondary and tertiary markets as prime locations for hospitality development, driven by economic trends, shifting travel behaviors, and evolving business ecosystems.
In 2025, the question isn’t whether secondary markets are viable for hospitality investment—it’s which markets will deliver the best returns.
Why Secondary Markets Are Gaining Traction
1. Population Growth & Economic Expansion
Many secondary markets are experiencing population booms and economic diversification, creating strong demand for hotels. The Sunbelt states, for example, continue to attract businesses and residents due to lower taxes and a high quality of life.
Case in Point: Columbus, OH saw 24% GDP growth from 2015 to 2023, driven by technology, healthcare, and advanced manufacturing expansions. With the city’s growing corporate base, hotel demand is increasing, making it a hotbed for investment (Source: U.S. Bureau of Economic Analysis).
2. Rising Business Travel & Conference Demand
While major convention cities remain strong, regional conferences and corporate travel hubs are increasingly choosing secondary cities due to affordability and accessibility.
Example: Nashville, TN, long considered a secondary market, has transformed into a hospitality powerhouse. With the Music City Center drawing 500,000+ attendees annually, hotel demand has surged, fueling continued investment (Source: Nashville CVC).
3. Favorable Cost Structures
Land acquisition and development costs in primary markets have become prohibitively high, tightening profit margins for new hospitality projects. In contrast, secondary markets offer more favorable cap rates, lower operational costs, and higher return potential.
The average hotel cap rate in primary markets sits at 5.5%–6%, while in secondary markets, investors can see 7.5%–9% returns (Source: CBRE Hotel Investor Survey).
4. The Growth of ‘Bleisure’ Travel
The rise of remote work and blended travel (business + leisure) has created demand for hotels in emerging lifestyle destinations that aren’t traditional business hubs.
Example: Greenville, SC has emerged as a major bleisure destination, attracting remote workers and tourists alike. With a 48% increase in hotel RevPAR since 2019, the city exemplifies the opportunity secondary markets present (Source: STR).
Where Are the Next Big Opportunities?
Columbus, OH – The Midwest’s Rising Star
Drivers: Booming tech and healthcare industries (Intel’s $20B investment in semiconductor manufacturing).
Demand: Business travel, conventions, and university-related stays.
Investment Potential: Strong mix of select-service and extended-stay hotels.
Charlotte, NC – A Financial Powerhouse
Drivers: Growth in fintech and banking (2nd largest U.S. banking hub after NYC).
Demand: Corporate travelers, regional meetings, NASCAR & sports tourism.
Investment Potential: High-end boutique hotels and lifestyle brands.
Boise, ID – An Outdoor & Tech Boom
Drivers: Rapid in-migration, booming startups, and outdoor tourism.
Demand: Leisure travel, business stays tied to tech expansion.
Investment Potential: Select-service and upscale boutique hotels.
Oklahoma City, OK – The Underrated Growth Market
Drivers: Oil & gas resurgence, growing bioscience sector, NBA tourism (Thunder).
Demand: Business and regional events.
Investment Potential: Midscale and extended-stay developments.
Tucson, AZ – The Affordable Southwest Destination
Drivers: Year-round tourism, major university, growing startup scene.
Demand: Leisure and long-term stay markets.
Investment Potential: Resort and branded extended-stay hotels.
How to Approach Secondary Market Development
1. Identify Demand Drivers
Look for cities with a diverse economic base, strong employment growth, and infrastructure investments supporting future expansion.
2. Prioritize Location & Product Fit
Airport and business districts = select-service & extended stay.
City-center and lifestyle districts = boutique and upscale hotels.
High leisure/tourist traffic = resorts & experiential brands.
3. Leverage Incentives & Tax Benefits
Many secondary markets offer tax credits, public-private partnerships, and opportunity zone incentives to attract hospitality investment.
4. Partner with Strong Operators & Brands
Smaller markets often require a brand presence that can drive loyalty and distribution, especially for midscale and upscale hotels.
Secondary Markets Are No Longer ‘Secondary’
The traditional rules of hospitality investment are shifting—and secondary markets are at the center of this transformation. With lower costs, strong demand drivers, and higher potential returns, cities like Columbus, Charlotte, and Boise are proving that big opportunities exist beyond the usual suspects.
For hospitality investors looking to diversify portfolios and tap into high-growth markets with lower competition, secondary markets represent a strategic and lucrative path forward.