River engineers have been on site at Franz Josef as authorities consider whether the swathe of land just outside the West Coast town, devastated by flooding this week, can be made safe again.
The Waiho River protection wall was breached in the early hours of Thursday, leading to the evacuation of more than 180 people.
The school and kindergarten remained dry, on an island surrounded by floodwaters.
Guests returned to the Top 10 Holiday Park that evening, but the Scenic Hotel had up to 2m of fast flowing water running through it.
Westland District Council civil defence information manager Andy Thompson said this morning there was a "probability" the hotel would need to be demolished.
"The focus is on the school and kindy," he said, referring to their future and how to protect them.
West Coast Regional Council chief executive Chris Ingle said last evening a team of Canterbury-based river engineers had looked at the river over the past two days.
"They are working up a proposal with NZTA and WDC and DoC to develop short- and long-term strategies for managing the Waiho River."
Mr Thompson said his understanding was the breach in the river wall - stretching a couple of hundred metres - had not been patched up. Instead, a deflection had been put in place.
There was no point doing a half-hearted job of fixing it, when another flood would take it out.
He said drinking water was fine - a pipe had the end knocked out during the flood - and people did not need to boil water. The notice to do so had been precautionary, and had been lifted.
He said sewage was going into the Waiho River, but as it was a few kilometres from town there was no risk to public health.
There were conflicting reports on the damage to the sewerage scheme, he said, with one part possibly destroyed, and another part breached.
"Engineers are working on it."
Mr Thompson said Franz had just 130 ratepayers, but up to 5000 tourists at a time.
The town would need a multi-party fix. "There's a lot of money got to be spent."
He said the civil defence plan worked well, after people checking the wall on Wednesday evening spotted a problem.
"My understanding is they saved lives," he said, noting once the wall went, up to 2m of water went through the hotel.
"If people hadn't reacted the way they had, the possibility is high lives would have been lost."
- By Laura Mills of the Greymouth Star
