A $20 million expansion and renovation project at the Sheraton Perth has elevated its ranking as Western Australia’s largest hotel, taking the long-held position from the InterContinental Perth Burswood, according to the latest survey of the industry by W
A $20 million expansion and renovation project at the Sheraton Perth has elevated its ranking as Western Australia’s largest hotel, taking the long-held position from the InterContinental Perth Burswood, according to the latest survey of the industry by WA Business News.
The data, compiled for the WA Business News 2008 Book of Lists, shows the five-star Sheraton added 96 rooms as part of its expansion project, taking it up to a total of 486 rooms (see Book of Lists page 18).
The Burswood slips to second place with a total of 413 rooms, while the Hyatt Regency Perth is third with 367 rooms.
The Sheraton unveiled its new rooms late last year, after spending almost seven months converting its Adelaide Terrace office space to executive rooms and suites.
Noticeably, the Sheraton expansion was the only major development in the market, despite growing demand from the corporate sector and the largest growth in revenue per available room (RevPAR) of all the states.
There have been no major room additions in the city since the opening of The Richardson Hotel and the Medina Executive Barrack Plaza in mid 2006, which has caused significant supply-side constraints in the market.
Tourism analyst Alan Boys said that, based on forecasts, Perth would require an additional 250 rooms, or the equivalent of one Novotel Langley or Burswood Holiday Inn, each year from 2009 onwards to meet market demand.
“In peak times we’re very short, but at other times we’re not so bad. But we are clearly hitting capacity constraints, particularly mid-week,” he said.
The rumoured conversion of the 333-room Rendezvous Observation City Hotel to residential apartments could add further pressure and lead to a net decline of available rooms.
“If [Observation City] does close, it will further impact the market and make it even tighter,” Mr Boys said.
The lack of available sites, high construction costs and the strength of the residential and commercial sectors, have been cited as key constraints to new supply.
But solid improvements in occupancy, double digit percentage increases in room rates and RevPAR in recent years could restore confidence in the market and encourage new hotel developments.
Hyatt Regency Perth general manager Robert Dawson dismisses claims the room shortage has reached crisis point.
“Perth is just reacting to the market. In other Australian cities, in Melbourne and Sydney, there will be times of the year when its more difficult to get a hotel room,” Mr Dawson said.
“It’s a symptom of a growing economy. It’s a good symptom to have.”
He said yields have still got a little way to go to inject the confidence in the market needed to fuel investment.
“[Yields in Perth] have gone up a bit, but were not matching the yields of some of our colleagues in the eastern states,” Mr Dawson said.
The Hyatt is currently renovating and remodelling its cafe restaurant, at a cost of about $2.6 million, and is finalising plans for further room renovations.
Tourism Council of WA president Scott Henderson said he was confident the improved RevPAR, or yields, on the back of increasing room rates would make hotel investment more attractive to developers.
“The cost structure and yield structure in Perth have been catching up with other cities,” he said.
“Perth five years ago had relatively low yields and return on investment for operators. Yields need to match the cost of capital. We’re getting to that level now.”
Renovations and additions have been the preferred option for a number of Perth hotel operators looking to expand capacity or attract stronger returns.
The largest is the proposed $30 million renovation and expansion project by the four-star Seasons of Perth on Pier Street.
Expected to start this year, the project will involve the addition of extra floors and the renovation of its existing 116 rooms.
The next major new hotel development for the Perth CBD, the Frasers Suites hotel, is expected to come onstream in 2010.
The 180-room, $70 million hotel will form part of a $300 million mixed use development on the former bus depot site in East Perth.
There are also plans for a $25 million, 121-room hotel on Parker Street in Northbridge, opposite Russell Square.