This appears to be a somewhat confusing issue, as lists and subheadings tend to get used interchangeably. So here are the basic rules:
Use a list for a series of items that only take up 1-3 lines. A good example is when you're listing a country's regions. Chances are you'll just list the region names, without writing very much about them.
Use a subheading for topics such as cities, sights and activities, or events and festivals where you have written more than 3 lines about them. A subheading means that people can click straight to it from the content box at the top of the article. When there's 4 or more lines written about a place or activity, we deem it to be worthy of its own line in the navigation.
Notice how Melbourne and Sydney have both been put into subheadings with paragraphs written about them, while the other cities have been grouped into a list. One benefit of doing things this way is that people quickly get an overview of the 2 major cities (Melbourne and Sydney) and a rundown of the other Australian cities.
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