Sheraton shows its hand

The Sheraton Perth Hotel has unveiled 50 new hotel rooms as part of a yet-to-be completed $20 million renovation, the first major five-star development in Perth for a number of years.

Sheraton plans to open a total of 96 new rooms by the end of January, taking the number of rooms on offer to 486, which it says will make it WA’s largest five-star hotel.

The refurbishment also included a new executive club lounge, indoor swimming pool and Meetings on 5, a business meeting centre consisting of seven boardrooms and meeting concierge services.

The development comes in the wake of an industry report on the sector by tourism analyst Alan Boys, which highlighted an undersupply of hotel rooms in Perth.

 “Given the outlook of increased demand for accommodation and limited additions to supply, it appears inevitable that the Perth hotel market faces a prolonged period of undersupply of rooms,” the report says.

“As Perth is the prime gateway for the whole of the state, insufficient accommodation to meet tourist demand in Perth is likely to have consequential adverse economic and employment impacts within the regions.”

While the Sheraton says it has been lifting room rates this year in light of increasing demand for its services, Mr Boys’ report, ‘Perth Hotel Investment Study’, shows the industry continues to suffer from chronic discounting and “sub-economic performance”.

The report found that, last year, hotels experienced the biggest demand for rooms since 1996, yet when adjusted for inflation, the average room rate for four- and five-star hotels in Perth was 22 per cent lower than rates charged in 1996.

The average room rate was $145 in 2006, compared with an inflation-adjusted figure of $177 charged in 1996.

Occupancy levels in Perth have been above the long-term average for the past decade, however.

The report, compiled for Tourism WA, offers a number of reasons why discounting has continued despite increases in occupancy levels in recent years.

They include the introduction of the GST seven years ago, negative growth in the economy in 2000 and early 2001, Qantas’ decision to shift to Perth-based cabin crew, and terrorism-related events that had immediate impacts on the market earlier this decade.

It also added that there had been fundamental changes to the way hotels sold rooms to corporate guests, which has had an adverse impact on the market.

“Many of the major corporate users have outsourced their buying function for accommodation into national buying consortia that often aggregate a number of clients to secure high volume discounts for rooms, often securing heavily discounted rooms on a national basis,” the report says.

However, the study shows room rates in Perth have been increasing since 2004.

And there is demand for more rooms.

Mr Boys said that, assuming demand grew at an average of 3 per cent, Perth would need to provide 270 to 300 rooms per year, or the equivalent of a Novotel Langley, within three years to achieve occupancy rates of no more than 80 per cent

The average growth rate for Perth four- and five-star hotels in the past decade has been 4.3 per cent.

But in order to make development costs attractive, average room rates in WA would need to jump 70 per cent to 150 per cent, the report states.

The report recommended the state government stipulate a hotel development as a precondition of any development of the western foreshore, provide stamp duty, payroll tax and land tax relief, and review general zoning and planning treatments for tourism zoned properties, particularly in the CBD.