Dunedin Mayor Dave Cull said when contacted the news was ''not surprising'', but it removed any threat of a $300,000 bill for legal action for the council.
''Clearly, that kind of large demand on finance and resource is something to be avoided if you can help it,'' Mr Cull said.
Betterways had lodged an appeal against last year's decision by a Dunedin City Council hearings committee to decline consent for the 27-storey hotel.
The appeal was placed on hold while Betterways and council representatives negotiated but Betterways director Jing Song, of Queenstown, pulled out of a memorandum of understanding with the council on April 14.
At the time, she declined to comment when asked what would happen to the company's Environment Court appeal.
Yesterday, Betterways solicitor Phil Page, of Dunedin, confirmed the company had written to the court on May 2 withdrawing the appeal and had received confirmation it had been from court staff last week.
Mr Page could not comment on the reasons for withdrawing the appeal, saying only he was acting on instructions from Ms Song.
Ms Song said yesterday there was little point in appealing, given the lack of support from the council, and no point ''wasting energy and resources on it any more''.
Last month, she blamed the decision to scrap the project on poor communication and missed deadlines by the council.
However, emails released to the ODT confirmed council staff had been in regular contact with Betterways' representatives.
Ms Song, speaking last month, also said she remained ''open'' to the idea of developing another site, amid rumours of a switch to the Otago Regional Council's vacant waterfront headquarters site, but would not elaborate.
''Whether it happens in future or not, we'll see, but we're definitely not thinking about anything at the moment.''
Both the city and regional councils confirmed yesterday they were no longer in discussions with Betterways over possible sites for the hotel.