An artist's impression of the Sheraton Melbourne in Little Collins Street.
Melbourne's high occupancy rates and lack of recent investment in new hotels make the city a good bet, says Hal Philp, general manager of the Sheraton Melbourne, which will open its doors at the end of the month.
While the city is not new to the Starwood-owned Sheraton brand, which exited nine years ago when Sheraton Towers Southgate was rebranded as the Langham Hotel, the opening of the 174-room hotel at the site of the old Naval and Military Club site on Little Collins Street, is the first five-star hotel in the CBD in six years and there is strong demand to tap.
''The Melbourne market is a mature market,'' Mr Philp said. ''It's a market that has seen good growth year on year and developments have not been as often … that's what makes a promising proposition. From our indications, that looks to continue.''
Boosted by a strong calendar of events that includes the spring racing carnival, Australian Open and AFL, Melbourne has a high proportion of domestic visitors that has buoyed the hotel market in recent years, even as domestic business travel has been flat.
A fall in the value of the Australian dollar is likely to keep domestic tourism strong.
The Sheraton Melbourne, along with the Parkroyal Docklands - planned for completion in 2016 - is part of a pipeline of an estimated 936 rooms that will be added to the city's hotel stock over the next three years to meet the growth in demand that is expected as the economy picks up and low-cost carriers increase the number of direct visitors to the city from Singapore and Malaysia.
Despite the increase in supply, Melbourne's hotel occupancy is likely to be at a high 85.7 per cent by the year to December 2016 - well above the national average of 68.9 per cent, according to Deloitte.
Melbourne room rates are projected to grow 3.8 per cent per annum over the three years to December 2016, underpinning a growth in revenue per available room of 4.4 per cent. This is less than Hobart's expected 5 per cent growth and Sydney's 4.9 per cent, Deloitte says.
Mr Philp was appointed in October to lead Sheraton Melbourne's opening, he having previously been deputy general manager for the opening of Starwood's top brand St Regis hotel in Doha in early 2012.
The biggest difference between that 350-room hotel - which had its own private beach - and his latest project is scale, Mr Philp said.
Opening a hotel property in an emerging market carries fewer limitations than doing so in a mature one, he said.
''Getting the right location is imperative,'' he said. ''In mature cities, such as Melbourne, those locations are much more rare.''
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