One of the resort's oldest backpacker hostels is likely to be demolished to make way for the development.
Bungi Backpackers - formerly Queenstown's maternity hospital - occupies half a large site owned by Three Beaches Ltd.
Last May, the company bought the property neighbouring the backpackers, an old house on 2580sqm of land, for $2.8 million.
It has now applied for permission to demolish the house and has a preliminary contract to sell the whole site to a hotel developer.
Three Beaches' Dunedin-based director Alistair Broad said the contract was still conditional, and it had agreed with the purchaser to keep it confidential.
But if the project went ahead, it was expected the backpacker hostel would be removed.
Mr Broad said the contract could be signed and sealed relatively soon.
"That's not to say the process of building a hotel will be rapid, because to use the site of that size well, a lot of work will go into design.
"But it's probably going to be Queenstown's next hotel site.''
The site, bordered by Stanley, Sydney and Melbourne Sts, is already zoned high-density.
Three Beaches, co-owned by Queenstown developer Chris James and Christchurch's Peter Dobbs, aims to clear the vegetation and residential properties at 11 Stanley St.
The dilapidated early 1900s bungalow and ancillary buildings and the site itself belonged to the Anderson Estate.
Dr Bill Anderson had bought it in 1952, when he was Queenstown's sole medical practitioner.
He died in 1978 but his widow, Molly Anderson, lived to the grand old age of 102. She died in 1998.
The rateable value of the land is almost $3.3million.
Bungi Backpackers is now leased and operated by Sir Cedrics, which also operates Southern Laughter Backpackers and Tahuna Pod Hostel in the resort.
