The committee approved $129,000 for an upgrade of Marine Parade, which includes new lighting, paving, plaques at Memorial Gate and a new footpath and seating for the parade.
Kim Wilkinson, of Wilkinson's Pharmacy, said it was appalling the upgrade would take away four car parks at the Memorial Gates.
"Taking away any car parks is going to impact on downtown businesses. They are taking car parks away and businesses are struggling to find parks for their customers," he said.
A report to the committee by community services manager Paul Wilson said the memorial avenue was a key part of Queenstown's identity and was one of the most important public spaces in the resort.
He said the area had poor frontage, car parking clutter, a sewage pump station, inadequate lighting and poor soils.
Marine Parade is Queenstown's War Memorial, extending from the Memorial Gates to the bridge across Horn Creek beside the bath house.
The Returned Services Association had approached the council to upgrade it and add plaques.
Mr Wilson said council agreed to prepare an overall landscape plan.
At the same time, council had been investigating options for sewerage management.
"A project to create a storage tank has now been abandoned and options for an upgraded pipeline are now being considered."
Council had consulted affected parties and key issues were identified, Mr Wilson said.
The Novotel hotel was concerned about the loss of privacy for guests and potential noise and Mr Wilkinson was concerned about the loss of car parks.
The plan costs $190,000.
Mr Wilson said council would apply for grants to make up the $61,000 shortfall.
The plan includes extending the paved area in front of the gates, which would reduce car parks by four.
It also would install new lighting, a 10m flagpole, new seating and bins and new footpaths.
The lighting alone costs $156,000.
At the committee meeting, Cr Vanessa Van Uden queried the "extraordinary amount of money" for lighting.
"The decorative lighting sounds great . . . but it is inappropriate," she said.
Mr Wilson said the existing lighting was inadequate, inefficient and dilapidated.
The uplighting for the trees, which costs $34,037, could be deferred if external grants could not be secured, he said.
The existing poles would be replaced with nine energy efficient lights on custom-made timber poles and the memorial gate would be uplighted.
The work is to start this year.
