Doors are closing on cut-price digs

As the corporate market recovers and Australian hotel prices catch up to the rest of the world, cheap room rates are soon to be a thing of the past.

THE news is not good for bargain hunters: the days of cheap hotels are all but over.

Rates for Australian hotels are about to take off, with occupancy levels soaring and demand starting to outstrip supply.

It will be a tough readjustment for those who have grown used to five-star hotels at three-star prices, or treating ourselves to a night away just because we can.

For the past 18 months, we have been spoilt by artificially low prices, with rates slashed to encourage leisure guests to fill rooms in the absence of global financial crisis-affected business travellers.

Now the business travel and conference market has come back with a vengeance and hoteliers are fast losing interest in the price-conscious holidaymaker.

Hotel companies have so far shown restraint with rates and not rushed to put them back up to pre-crunch levels. However, the supply-and-demand equation will soon take care of that.

Hotel occupancy rates in Australia are hitting levels not seen for many years, helped along by the fact relatively few new hotels have been built in the past decade, particularly in Sydney.

The latest figures from hotel benchmarking agency STR Global show Australia is leading the way with rate increases, with year-on-year rises of almost 37 per cent in Sydney and more than 40 per cent in Brisbane.


Even in Melbourne, which has had more investment in new hotels than other capitals, rates have jumped by more than a quarter.

The Accor hotel group's vice-president for Australia, Simon McGrath, says consumers not only need to get used to higher prices, they need to realise those prices are here to stay.

While airfares around Australia are expected to remain low because of abundant supply, it is unlikely any major new hotels will be built until 2014 or beyond.

"That investment was taken away in 2007 [by the GFC] ... I think in 2012 or 2013, we will start to talk about it again," McGrath says.

He says while signs of recovery have been around since November, February marked a turning point for the industry.

The STR figures show Sydney hotel occupancy for both February and March was 88.4 per cent - a number that should put a smile on the face of any hotel manager. Even in 2007 and the first half of 2008, when the hospitality sector was running hot, occupancies did not reach such levels.

McGrath says while there were a few special events that helped fill rooms in February, high demand for corporate travel and conferences was a key factor. A spokesman for business travel agency Corporate Traveller, Brent Novak, says the travel market is only a couple of months away from a full recovery.

Novak says there has been a dramatic increase in demand from corporate travellers in recent months: "We're going through a boom period at the moment," he says. McGrath says consumers also need to take into account the fact Australian hotel prices have long been below world standards.

"We have had it pretty good. They [Australian hotel rooms] are underpriced for the quality and service that is provided," he says. The Hotel Price Index, produced by, shows even parts of Asia have been priced above Australian cities.

The average nightly price for Sydney last year was £84 (about $140), compared with £106 in Mumbai, India, and £100 in Singapore. Not surprisingly, European and US cities dominated the expensive end of the list, with New York averaging £149 a night, Geneva at £144 and Paris at £113.

Hotel sources say one of the biggest crunch times for the Australian market will come with the New-Year peak period, which will coincide with Ashes cricket being played around Australia.

"People had better start looking [for rooms] now," one hotel executive says.

Accor's McGrath says major events will be a continuing issue in a time of limited supply.

"Check an events calendar and plan your holiday around it," he warns.

Best bet

The key to snaring a hotel bargain in a boom market is finding out when the quietest days and months are.

In capital cities, Fridays and Sundays are emerging as the best bets for cheap rooms.

The general manager of brands for, Megan Magill, says demand varies by destination, so be aware of factors such as Melbourne's football season, which creates demand for Friday and Saturday nights. In holiday spots such as the Sunshine Coast, prices are considerably lower during the week in summer.

Accor's Simon McGrath says leisure travellers should also embrace loyalty programs, as hotels tend to first offer deals via their own databases.