The Dunedin City Council has granted non-notified consent for the hotel, meaning there is no need for resource consent hearings.
The proposed development is part of a wave of hotel development in Dunedin, including the Distinction Hotel in the former Chief Post Office, the Chamberson Hotel on the corner of lower Stuart and Cumberland Sts, and a 27-room hotel planned for Filleul St.
Flat Iron Investments Ltd, through directors Lauchlan Chisholm and Gregory Paterson, applied for consent to redevelop the Allbell Chambers building in Stuart St near the Octagon.
The hotel would be on the first and second floors of the category two heritage building, and was described in the consent application as a ''high tech, boutique'' development.
It would have no reception area. Instead, guests would prepay online and access their rooms with a previously provided Pin.
There would be 11 rooms on the first floor and 13 on the second, and a ''guest lounge-come-library'' would be provided.
The hotel would be accessed from a revamped lobby off Stuart St, and the building would get a new lift and stairwell, and a new roof.
The 1909-10 building is in the central activity area under the district plan, and is within the lower Stuart St heritage precinct.
A hotel is a permitted activity in the area under the council's district plan.
Flat Iron's directors did not respond to a request for comment yesterday, but the consent noted council staff welcomed a plan to reinstate a cupola, awning and cornice that reflected the original design on the ground floor.
Council urban designer Peter Christos described the development as positive for the protection and maintenance of the building.
He said it would also have positive economic benefits for surrounding businesses, and help provide accommodation options when there were larger events in the city.
However, there was concern from heritage adviser Andrea Farminer about a lack of detailed information in the application.
Flat Iron responded it was comfortable with a consent condition requiring final details to be approved by the council's consent manager.
There was also concern from the council about changes to the rear of the building, although the applicant said keeping it as it was would mean a complete redesign of room layouts on that side of the building.
The consent came with conditions Flat Iron prepare a final design of the entrance on the Stuart St facade in consultation with Heritage New Zealand, and details of other aspects including signage and building colour, as well as a final design on the rear of the building.
