If you don't mind a bit of uncertainty (you can only book 28 days in advance), the rooms at the Observatory go as low as $255 on wotif.com, and are rarely more than $309, below the Westin and Sheraton.

http://www.travelandleisure.com/worl...t=hotelsaunzsp lists the best hotels in Australia, New Zealand, and the South Pacific. The Four Seasons and Observatory, respectively, are the top two in Sydney, at #3 and #4 in the region. The Four Seasons is your typical, large, skyscraper hotel, while the Observatory is a boutique hotel. I'd chose the Observatory.

The Conde Nast Gold list of the top 108 hotels in the world includes a remarkable 7 hotels in Sydney: Swisshotel Sydney, Four Seasons Sydney, the Observatory Hotel, Shangri-La Hotel Sydney, Park Hyatt Sydney, and the Intercontinental Sydney, and the Establishment. Lilianfels in the Blue Mountains also made the cut. W Sydney, now BLUE Sydney, made the list last year, but didn't return this year.

The Establishment Hotel in Sydney is an interesting choice, particularly if you like places that are a bit trendier and great food. http://www.merivale.com/establishment/hotel

If you're into the beach scene (though it will be on the cold side in May), Ravesis in Bondi might be a good option too. Like the Establishment, Ravesis is on the trendier side, so it may not be your cup of tea. http://www.ravesis.com.au/page/stay.html

-Merrick