If your friends want a smaller, boutique luxury experience, I would recommend Sir Stamford at Circular Quay. This former Ritz Carlton is located across from the Botanical Gardens, several blocks up Macquarie Street from the Quay and Opera House. The hotel has beautifully appointed rooms (in the classical Ritz tradition), great concierge service, and a wonderful breakfast buffet. We got great rates for this property on wotif.com.