Queenstown businessman Cedric Hockey applied for resource consent in July to establish the backpackers at 11 Henry St.
If approved, it will occupy all of an existing three-storey building.
The consent application states the facility will have 15 car parks on site - a shortfall of 13 on the number required by the Queenstown Lakes district plan.
Zig Zag Zoo child-care centre owner-operator Mike Stewart said it would be ''unfair'' if the facility proceeded without being fully notified.
''Car parking and traffic flow in that part of the world is already a bit of a nightmare,'' Mr Stewart said.
He had undergone a lengthy traffic planning process when setting up his business four years ago, despite it creating ''far fewer traffic movements'' than a backpackers.
He was also required to get approval from neighbours, and expected any new business to do the same.
''It would seem a little bit unfair. We went through a two and a-half year design and application process that was fully notified at an exorbitant cost.''
Mr Hockey would not comment on the proposal to the Otago Daily Times, but John Edmonds and Associates consultant planner Karen Page confirmed the application had been lodged on a non-notified basis.
The council had responded it was satisfied the number of on-site car parks was sufficient, but had asked for more information for the application's traffic assessment, Ms Page said.
''The only issue they have is during peak periods, such as when there's a large event in town, and the advice we've received from our traffic expert is that in those rare occasions, there is an overflow for which off-site car parking is available very close to the site.''
In the application, Ms Page writes the shortfall in on-site car parking was mitigated by the site's ''easy access to public car parking and transport''.
Henry St had two-hour restricted parking, and the majority of overflow parking would be absorbed by a public car park less than 100m away in Gorge Rd.
