Sydney spreads out around a harbour, so your first decision is whether you want to wake up near the water or near the action. The CBD and Circular Quay put the Opera House and ferries on your doorstep, but you will pay for the view. Darling Harbour is a short walk from the centre and leans family-friendly, with a cluster of big hotels close to the aquarium and the convention centre.
If the beach is the point of the trip, look at Bondi and Manly. Bondi suits a livelier, café-heavy stay, while Manly is calmer and a ferry ride from the city centre. Both cost less per night than a harbour-view CBD room, and the trade-off is a longer commute.