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Home Secretary Suella Braverman has not ruled out using disused cruise ships to house asylum seekers, saying "everything is on the table".
She said it was "unacceptable" that housing asylum seekers in hotels costs the taxpayer more than £5m a day.
She told a House of Lords committee a range of alternatives are "on the table" and are being looked at.
Rishi Sunak raised the idea of using cruise ships during his summer Tory leadership campaign.
Appearing before the Lords Justice and Home Affairs Committee, Ms Braverman suggested officials are in talks with ship companies.
The home secretary said she wanted to end the use of hotels "as quickly as possible because it's an unacceptable cost to the taxpayer".
She said the total cost of housing asylum seekers this financial year would rise to £3.5bn.
Ms Braverman added: "We will bring forward a range of alternative sites, they will include disused holiday parks, former student halls - I should say we are looking at those sites - I wouldn't say anything is confirmed yet.
"But we need to bring forward thousands of places, and when you talk about vessels all I can say is - because we are in discussion with a wide variety of providers - that everything is still on the table and nothing is excluded."
Mr Sunak put forward the cruise ship idea in July, as part of a 10-point plan to tackle illegal immigration.
Liberal Democrat spokesman Alistair Carmichael MP said the cost to taxpayers of the government's "failed asylum policy has become simply astronomical".
He also accused the home secretary of "doubling down with the same failed approach" by not creating safe and legal routes for refugees or dealing with the claims backlog.
Mr Carmichael described the cruise ship idea as "ludicrous, ineffective and incredibly expensive".
Ms Braverman also told the committee that staff assessing asylum claims were each making one decision a week on average.
She said more than 100,000 asylum seekers are still awaiting a decision, and in some cases have been waiting longer than a year.
The need to improve the productivity of case workers was highlighted by the home secretary, and she told the committee there would be greater use of digital technology and a move away from a paper-based system.