There's room for big improvement

The rising cost of hotel rooms could mean that only the well-heeled will be able to afford to stay in Australia's biggest city.

SYDNEY could be heading for a time when ordinary Australians and visitors will not be able to afford to stay in its hotels, the industry is warning.

Lack of investment has already pushed hotel occupancy rates above 85 per cent - which in reality means the city's hotels are full much of the time - and there is no relief on the horizon.

Only the equivalent of a handful of rooms has come on the market since the Sydney Olympics and the shortage will only be exacerbated when AirAsia X starts flying plane loads of Asian tourists into Sydney from April.

The chief executive of the Tourism and Transport Forum, John Lee, says the daily AirAsia flights from Kuala Lumpur will eventually bring an additional 55,000 visitors a year to Sydney and they will need somewhere to stay.

Demand's there and no one wants to see us end up like Perth.

There is already "no room at the inn" in most leading hotels during the week and lack of supply will push room rates up.

"In the last five years, Melbourne has added just under 3000 beds to its stock, while Sydney's number is less than half of that," Lee says.

"We are at a tipping point.

"The demand's there and no one wants to see us end up like Perth, where the shortage has became so acute that people are being charged over $700 for a room."

The general manager of, Megan Magill, says Sydney hotels have been particularly busy over the past year, largely thanks to the corporate travel and conferences markets.

While this means there are still some good deals to be found on weekends, when the business travellers go home, there are often not enough rooms to go around.

"We do need more hotels, there is that demand," Magill says.

So if the demand is there, why is no one building hotels to match it?

Lee says it has become more profitable for developers and owners to build or convert to commercial or residential space, with hotels "running in third".

"What we've got is a structural issue," he says.

"It's really hard for a hotel to stack up, because by international standards we don't charge as much as they do in other parts of the world.

"What we need is direct incentives or government intervention to promote [hotels]. We need to act now so we don't see a spike that makes it impossible for the average Australian to stay in a hotel [in the future]."

Figures from the Hotel Price Index show the average price for a hotel room in Sydney is now $172 a night, compared with $154 a night in Melbourne. A four-star room in Sydney will set you back an average $269 a night, or $41 a night more than the four-star average for Melbourne.

The gap is also present at the budget end of the market, with a two-star room costing an average $130 a night in Sydney compared with $112 in Melbourne. The TTF Capital City Accommodation Index, which draws from Australian Bureau of Statistics figures, shows the average room rate in Sydney rose about 8 per cent in the year to late last year. This was almost double the increase recorded for Melbourne. Magill says there are still good deals to be found for Sydney but you need to know how to find them.

The best night for a bargain is undoubtedly Sunday but for those who don't consider that an option, "11th hour" deals are still one of the top alternatives.

Travellers who are flexible with their dates and choices can pick up great rates when hotels throw out last-minute rates for unsold rooms.

Magill says winter weekends offer some of the best rates of the year and mystery hotel deals can offer huge savings.

Another way to find an affordable room is to look outside the central business district, in areas such as the north shore and the surrounding northern beaches.

"There are still a lot of really nice hotels that are around the fringe, outside the CBD," Magill says.

If you want a hotel room for a specific date, such as an anniversary, Magill recommends you start looking many months beforehand, as specials can be released at any time.

"If there's a definite date that you need, it pays to keep coming back and checking it," she says.

Taste for suite life

Australian travellers have high standards when it comes to hotels, according to the annual travel survey conducted by online agency

More than 60 per cent of the 2000-plus survey respondents said they tended to stay in four- to five-star hotels, while less than a third reported they went for hotels rated between one and three stars.

However, the properties at the top end — the all-inclusive resorts and luxury spa retreats — remain the domain of the rich, with less than 5 per cent of respondents staying in them.