Perth hotel developments hit as miners vacate The development of at least $600 million worth of new hotel rooms in Perth could be in jeopardy. THE development of at least $600 million worth of new hotel rooms in Perth could be in jeopardy as the city's accommodation sector caves in to the softening mining sector. Hotel occupancies and room rates are also slumping in Brisbane, where developers were planning to add thousands of rooms to the city's skyline. Perth's hotel room rates and occupancies slumped up to 25 per cent in the past two months, according to a key hotelier, sending would-be hotel investors, planning to cash in on $600-a-night room rates once enjoyed mid-week, running for cover. Property investor John Bond recently paid $88.5m for the Esplanade Hotel in Fremantle because he was cautious about the Perth CBD hotel market. "I guess it's the slump in the mining sector, certainly the economy has slowed down in Perth and Western Australia," said Mr Bond, director of national wholesale property syndicator Primewest. We chose to invest in Fremantle because we foresaw there was likely to be pressure on hotel rates in Perth. Perth-based hotel analyst Alan Boys said market conditions had clearly deteriorated. He doubted if all 2000 of Perth's mooted new hotel rooms, on top of the city's existing 9000 rooms, would proceed. "There is significant discussion about the number of new hotels coming into Perth," Mr Boys told The Australian. We are clearly seeing corporate softening. The hard rock mining, gold and junior explorers are getting whacked. The hotel market certainly peaked in 2011-2012. Mr Boys, head of the Dubois Group, said he expected investors would pull out because the change in market conditions had been reasonably significant. Anyone looking at building must be concerned. The medium-term outlook is problematic," he said. Mr Boys said Perth's hotel rooms were still full Tuesday and Wednesday nights but the rest of the week struggled. On the weekends, hotels were all but empty. "The leisure market is very soft, there's a lack of inbound and also a lack of demand from locals," he said. Hotel analyst Dean Dransfield said it was not just Perth that had been affected by the slowing corporate travel market. "In places like Port Hedland occupancieshave dropped more than 25 per cent, while room rates have dropped even more," said Mr Dransfield, of Dransfield Hotels & Resorts. Brisbane has had a soft few months. That's not just miningthat's also the Queensland government putting a freeze on things. (But) Perth is much more strongly correlated to mining's fortunes. Despite the slump in rates, Starwood's director of acquisitions and development, Andrew Taylor, said the company would plough on with its plans for a new Perth hotel. "Starwood is still aggressively looking to increase our representation in Perth as a key market because it's lacking in mid-scale and five-star accommodation offerings," Mr Taylor said. (But) we always knew there was a correction going to happen in the market. Revenue per available room (the standard industry measure) growing by double digits was not sustainable. There has been softening in that demand, that means competition for high paying guests is a bit tougher and people have had to reduce rates. Hotel analyst Rutger Smits said Perth was a promising market because it had not seen (any) new supply. If someone comes in with a good product and good location (it will do well.)  Mr Smits noted Perth had several significant hotel projects on its books, starting with Elizabeth Quay on the waterfront, the FESA house site which Starwood is looking at, and Crown's plans for a large hotel project. But if all those developments go ahead Perth would see a situation of softening demand, a recipe for lower occupancy and pressure on room rates. "The first projects will go ahead (but) the investors in the projects in the later stages will probably get cold feed," Mr Smits said. As always if there are 100 rooms in the pipeline, you will see 30-40 rooms succeeding and the others will not eventuate. Meanwhile, Tourism Western Australia continues to spruik Perth's attractiveness to hotel investors. Hotel occupancies are expected to keep increasing and will reach 86.3 per cent by the year ending December 2015, according to the West Australian government. "Room rates are also expected to continue to grow strongly, increasing at an average rate of 9.3 per cent per annum over the next three years," the group said. The government yesterday called for expressions of interest from developers to run a premium hotel in the centre of Karratha. On the site of the former aquatic centre, the hotel will front on to the town's main street, Sharpe Avenue. HOTELS: The InterContinental Hotels Group is believed to have won preferred operator status for Lend Lease's twin tower 900-room hotel complex at Sydney's Darling Harbour. Lend Lease confirmed it has been in discussions with IHG as well as a number of operators to manage the hotel complex, which is expected to include two luxury hotels such as a Crowne Plaza or an InterContinental as well as a lower-rated hotel. Construction of the two hotels is expected to start late next year as part of a revamp of the Darling Harbour precinct, including the development of Australia's largest convention centre under an agreement with the NSW government. Lend Lease has strongly denied IHG has been selected as the preferred operator. "Lend Lease has consulted a number of leading operators about the new ICC hotel (International Convention Centre), including IHG," said Lend Lease project director, Gavin Biles in a statement to The Australian. Lend Lease will proceed to lodge the development application and the hotel will then be developed and constructed by Lend Lease, with construction starting late next year. At this stage we have not appointed a hotel operator. "Lend Lease is not in exclusive discussions with anyone regarding the ICC hotel," he added. However, several sources yesterday insisted that IHG has been involved in the hotel's design and held intellectual property rights over the plans, which are before the NSW government. "Lend Lease is hoping that IHG and the end buyer will come together," said the source, adding that Lend Lease has so far been unable to find a buyer. IHG declined to comment. Meanwhile, the NSW government agreed contracts yesterday for the delivery of the temporary Sydney Harbour Exhibition site at Glebe Island after the failure of the first deal.