Barangaroo harbour hotel critical for Sydney: businesses

Business groups have welcomed the NSW government's approval of the Barangaroo project but say a planned hotel on Sydney Harbour is critical for the development and for Sydney.

Premier Barry O'Farrell has urged Lend Lease put the hotel on land, even though the developer has planning authority for the design on the harbour.

Mr O'Farrell was responding to a raft of recommendations in a critical review of the project, released today.

"The review suggested that in order to show some goodwill, Lend Lease consider moving the hotel from on the harbour back onto land," Mr O'Farrell told reporters in Sydney.

The premier also announced approval of the $6 billion project and that he would be taking personal control of it.

Alliance for NSW Future - representing nine NSW employment and industry bodies - welcomed the announcement, but tourism bodies expressed concern about uncertainty over the hotel.

Patricia Forsythe, executive director of Sydney Business Chamber, said although it was good to know the project was "shovel ready", Barangaroo needed a stand-out development.

"We know now that the government is standing with business in support of this project," she told reporters in Sydney on Monday.

"(But) there is no doubt that Sydney needs additional five-star hotels, there is no doubt as well that to put Barangaroo on the map, it needs to have iconic development."

John Lee of the Tourism & Transport Forum (TTF) said Sydney was "a little like Bethlehem.

"It's nearly full in terms of hotel occupancy," he said.