KEY hotels in Sydney and Cairns will experience turn-away demand in the next 12 months, according to a Colliers Jardine report. The Australian Hotel and Tourism Property Market Report says Australian hotels are enjoying buoyant trading, as seen in the nationwide 6.6 per cent increase in room demand last year. Allan Yeung, Colliers Jardine Hong Kong managing director, said: 'Demand is particularly strong in Sydney, Melbourne and Queensland, where higher occupancy is supporting tariff increases which is contributing to increased profits and values. 'There is increasing domestic investor interest in local hotel property, while Southeast Asian investors are maintaining their strong interest. Singaporean investors continued to dominate market activity last year, but the steadily improving yields are enticing local investors back.' Cited as a watershed year for the hotel industry by the report, Australia attracted a record number of domestic and international visitors last year. The number of international tourists grew to 3.4 million, an increase of 12 per cent over 1993. A record 34.5 million room nights were sold, up 6.6 per cent on the previous year. Other significant milestones for the year included a 27 per cent increase in hotel property investment with more than A$1 billion (about HK$5.57 billion) worth of hotels traded, and hotel asset values rising by about 15 per cent. Mr Yeung said: 'As a result of these very strong 1994 figures, and our prediction that the positive trend will continue, we expect average room rates to rise significantly over the next three years as occupancies reach record levels. 'In Sydney and Cairns, hotels can expect to experience turn-away demand in the next 12 months, a situation which will continue until new supply emerges, and in Sydney this will take three years.' Mr Yeung said many markets could support new hotel developments, and sale prices were roughly equivalent to construction costs. But, he said 'there is little construction activity, and equity is being channelled into the acquisition of existing hotels instead of new developments. 'The strata-title concept has attracted considerable interest from investors as a means of addressing shortfall of debt and equity raising. A number of existing hotels were strata titled in 1994 and sold to individual investors, and this trend is continuing,' he said.