A wave of disappointment is being felt around the state, after the appeal against the Gorge Hotel was supported by the Resource Management and Planning Appeals Tribunal.
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The only person who has expressed happiness over the decision was the appellant, Susie Cai and the Launceston Heritage Not Highrise group.
Tourism bodies, the Launceston Chamber of Commerce, the state government and the proponents all said they were disappointed by the result.
The appeal was upheld on height and compatibility, but not shadowing.
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Chamber executive officer Neil Grose it was difficult to understand how a "very sound" development application, that was supported by the council, could be overturned.
"This is a blow to business and investor confidence and puts a substantial $50M project for Launceston at risk which would create significant employment and other business opportunities for Launceston," he said.
Tourism Industry Council of Tasmania chief executive Luke Martin said Josef Chromy and the JAC Group had a vision for a truly outstanding hotel.
"I'm sure this is not the end of the project, but it will inevitably delay it," he said.
"We need a steady pipeline of new hotel investments in Tasmania to accommodate expected visitor growth, and ease the pressure on the residential market with demand for Airbnb style accommodation."
Mr Martin said the tourism body was increasingly concerned about the delays and barriers being applied on hotel developers, along with the time and cost applying to critical projects. He said the industry needs a robust planning system.
Most hotel developments in the state take about eight years from concept to opening, which Mr Martin said was too long and worrying.
Infrastructure Minister Michael Ferguson said the government respected the RMPAT had a job to do, but still supports the project.
"We wanted to see that go ahead, and we will be speaking with the proponent and the Launceston city council to see what the future might hold, because it's a good development for Launceston and the people want it," he said.
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JAC Group's managing director said the tribunal found the neighbour's amenity would not be unreasonably affected by the overshadowing.
"The council voted 10 to one in favour of the hotel and it still has the power to support this landmark building if it wants to by way of a special area plan," Mr Cocker said.
"That would involve a scheme amendment to be determined by the Tasmanian Planning Commission."
Launceston Heritage Not Highrise coordinator Jim Collier said Ms Cai had fought a David and Goliath battle.
"Very vindicating for Susie's appeal given she's one of the little people who chose to take on a multi-million dollar company, and has come out on top," he said.
"Councillors are elected to represent the people, not big business, and they've swung the other way."
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