Cost of Australian hotel rooms set to rise

SYDNEY - Australians can expect to pay up to A$40 ($44.48) more to stay at a domestic hotel as greater numbers of international tourists push prices up, tourism operators said yesterday.

But industry executives have warned against building more hotels, saying bumping up room rates would put Australian hotels more on par with their international counterparts.

John Hudson, the managing director of hotel investor Thakral Holdings Group, said there had been limited investment in new hotels in recent years as owners struggled with low returns.

This was caused by an oversupply of beds, heightened fears of terrorism attacks, the SARS virus and overall sluggish economic conditions internationally which dampened the tourism sector generally.

But Mr Hudson said prices would go up over the next few years as demand exceeded supply, with tourism industry forecasts pointing to a 78 per cent increase in inbound tourists by 2014.

"The revenue for an average five-star room in Australia is expected to rise between 7.5 per cent and 10 per cent over the next 12 months, which will help close the gap with other Western cities," Mr Hudson said.

"We have to get room rates up substantially to justify hotels."

Mr Hudson said the industry worked to a dynamic pricing system, where rates changed depending on the day of the week, season and how far in advance the booking was made.

According to figures from the Accor hotel group, the average cost of a five-star hotel in Sydney was A$395 compared to around A$590 in New York, or around A$672 in London.

Mr Hudson said it was too early to invest in more hotels to expand capacity as the heightened demand would simply restore a profitable balance to the sector.

"I would say it's at least three years before you can even remotely consider building new hotels," he said.

Accor Asia Pacific hotel group managing director Michael Issenberg said Australian operators were simply catching up to their overseas peers in raising rates and the perception that rooms always came at a discount had to change.

But discount online hotel booking service Wotif.com said hotel room prices had risen in Sydney, Melbourne and Brisbane in the past year and the internet offered customers more transparency than hotels would like.

"It (the internet) really has given a lot more power to the consumer in understanding real pricing in the marketplace," Wotif.com chief executive Graeme Wood said.

- AAP