The beer garden and former backpackers at the rear of the Grand Hotel, on Bong Bong St, is to be replaced with three storey motel, with two levels of carpark.
A four storey building was originally mooted for the site, along with a renovation of the Grand Hotel itself.
The original DA went to the Land & Environment Court, where it was refused on a number of grounds, including heritage concerns.
Rather than continue with the whole development at this stage, the owner then chose to modify the design of the proposed motel to satisfy heritage and access concerns.
The motel will contain four family rooms and 28 queen rooms, arranged around a central courtyard and private pool area.