City Park Grand Hotel will close from mid-March with more than a dozen jobs to be lost and all forward bookings cancelled.
The business is based in the historic Clarion Hotel on Tamar Street, which was included in $80 million plans for a five-star hotel and function centre proposed by Singaporean-owned Global Premium Hotels, trading under the Fragrance brand.
GP Hotels bought the Clarion Hotel building for $7.2 million in 2016, but the City Park Grand Hotel business is owned and run independently by a Tasmania-based business trust.
The development application for the five-star hotel is yet to be publicly advertised by the City of Launceston.
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A spokesperson for GP Hotels said they would have preferred the City Park Grand Hotel to continue trading until construction works could start, possibly within six months of the development application receiving final approval. They said that the decision to close the business was a matter for the business owner.
GP Hotels stated it was open to engaging with former City Park Grand Hotel staff for positions at the redeveloped hotel. Construction is expected to take several years, however.
In a letter to staff, the manager of City Park Grand Hotel said that the final day of trading would be March 21.
"We have not been advised at this stage whether the hotel will continue to operate," she wrote.
"However, advice has been received that all forward bookings are to be cancelled. As a result, all employee positions will be terminated as of Friday 20th March 2020."
City Park Grand Hotel reopened in March last year, with the manager praising the hard work of staff during the past year.
"We started with a zero slate with accommodation and it has taken a lot of hard work and effort to kick-start operations again, whilst dealing with a number of obstacles and challenges over the months," the letter reads.
GP Hotels' initial concept plans for Launceston's first five-star hotel include the full retention of the Clarion Hotel and 90 per cent of its internal walls and structure. Non-original additions at the hotel's rear would be replaced.
The majority of the GP Hotels plans centre on the old Alfred Harrap & Son wool store at the corner of Cimitiere and Tamar streets, which would be converted into an expansive function centre with bars and restaurants.
City Park Grand Hotel was contacted for comment.