Fireworks not the only thing rocketing over Sydney Harbour as hotel room costs set record

Sydney’s hotel room rates reached an all-time high on New Year’s Eve as patrons on average paid a massive $855 per room and the occupancy rate was at 95 per cent.

Midnight fireworks over Sydney Harbour on New Year’s Eve. Picture: Morris McLennan

Sydney’s hotel rates reached an all-time high on New Year’s Eve as patrons paid an average of $855 per room and the occupancy rate was 95 per cent.

But despite record rates and occupancies, analysts said it was unlikely a building boom would eventuate, given the city’s lack of builders and the high cost of acquiring sites.

CBRE national director of hotel, Wayne Bunz said Sydney might need new hotels but unless occupancies ran at more than 90 per cent throughout the year and rates were averaging $855 per room per night, a building frenzy was unlikely.

“It would be great if you were getting those kinds of occupancies and rates all the time but it will be a very long time before you see the influx of new hotels that we have seen over the last seven to 10 years. It’s very hard to find a good builder, find a site, and make them financially stack up on a cost per room basis,” he said. “Hotels are still selling below replacement value and that is why they are still a much sought-after asset class.”

Trilogy Hotels executive chair and industry veteran Tony Ryan said both of Trilogy’s CBD hotels – Mercure Sydney and Ibis Sydney World Square – performed exceptionally well, with record rates over the festive break.

Trilogy Hotels chair Tony Ryan.

“It is not just the CBD. Five of our managed hotels in Penrith, Paramatta, Sydney Airpor, and the Blue Mountains had occupancies above 96 per cent for the night, with four of them achieving 100 per cent,” he said.

Trilogy Hotels chief executive Scott Boyes said that in October, the NSW government announced a target of $91bn in annual visitor economy expenditure by 2035 – a 40 per cent increase from the previous target. The announcement included plans to add more than 40,000 hotel rooms across the state in conjunction with key infrastructure works.

As Western Sydney Airport comes online, that part of the city had the opportunity to enhance its position as a destination for visitors and a thriving hub for locals. Additional room supply, attractions and infrastructure would be key to achieving that, Mr Boyes said.

Despite the high cost of living, average room rates during December grew nearly 1 per cent while occupancies shot up more than 2 per cent compared with the previous year, according to recently released CanStar research.  During December, occupancies averaged 78.8 per cent with average daily room rates at $314.15 and revenue per available room $247.43 – up 3 per cent on the previous year.

New Year’s Eve pushed Sydney’s average daily room rate to $854.38 and revenue per available room to $854.38, while occupancy was 94.5 per cent – the highest level on the metric in December.

The second highest occupancy in December was recorded on the first night of four concerts by rock band Crowded House, on December 4, which led to 93.5 per cent occupancy.

The second-highest average daily room rates and revenue per available room rate levels were recorded on December 30, at $554.35 and $482.35.

Originally published as Fireworks not the only thing rocketing over Sydney Harbour as hotel room costs set record