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While I think it's nice to be accommodated and have function rooms in the same venue/hotel, I don't think it's absolutely necessary.
Plenty of times I've had to travel for work and be in a hotel a short distance from a conference centre/venue. As long as it's within walking distance I think it's ok.
Also in any case, people have the option of choosing to stay in the 'recommended' accommodation venue or any others nearby.
The main thing is the conference venue - good AV, the right size, ability to get dark enough for contrast on screen, catering etc.
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