Melbourne's hotel market is being impacted by a rapid rise in supply, research from industry analysts STR reveals.

Preliminary data for October found Melbourne’s supply of hotel rooms had risen 4.4 percent year-on-year, while demand for accommodation increased 2.9 percent.

According to STR, occupancy has fallen 1.4 per cent to sit at 85.2 percent, compared with October 2018 marking the lowest absolute occupancy levels in six years.

But the average daily rate has dropped by 3.5 percent to $188.95, resulting in a slump in revenue per available room (RevPAR) of almost 5 percent to $160.98.

Melbourne has seen just under 2400 rooms enter the market in 2019, while a total of 8100 hotel rooms will be added to Melbourne’s CBD, Southbank and Docklands areas over the next four years.

“STR analysts note the effect of supply growth on occupancy and ADR levels even with a rise in demand,” the research company stated.

“Daily data showed performance rather consistent with the corresponding days in 2018.”

Click here to view the preliminary October data for Melbourne hotels.

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