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The hotel would have restaurants, bars, conference rooms and a luxury day spa.
The hotel group, owned by Earl and Lani Hagaman, has owned and operated the 178-room, 4.5-star Dunedin Scenic Hotel Southern Cross since 1984 and, in 2003, built the 121-room four-star Scenic Hotel Dunedin City.
The group also owns and operates the five-star, 100-room Te Wanonui Forest Retreat, in Franz Josef.
Inquiries and title searches by the Otago Daily Times revealed the most likely site for the hotel is on the Scenic Southern Cross site, near the Exchange.
The company has an open car park on the site which could easily house a five-star extension, by keeping the car park on the bottom floor and building up.
A Smith St site, in a car park next to electricity sub-stations and the existing Kingsgate Hotel, is too small.
An extensive property the Hagamans lease close to Forsyth Barr Stadium has planning permission constraints.
Last week, Tekapo-based businessman Anthony Tosswill, of NZ Horizon Hospitality Group Proprietary Ltd, was revealed as the person behind a proposed 18-storey hotel on the Dunedin City Council’s Filleul St car park.
Dunedin Mayor Dave Cull said his first reaction to the announcement was that it was "fantastic news" for the city and showed the confidence an established operator like Scenic Hotel had in the burgeoning market.
"I will be absolutely delighted if this goes ahead."
Mrs Hagaman yesterday launched stinging criticism of the council and its involvement with Mr Tosswill.
She said she advised the council about Scenic’s plans for a five-star property more than three months ago and was surprised the council entered into an exclusive deal with another developer.
The Hagamans were urging caution about assessments of the size of Dunedin’s luxury accommodation market and were concerned to read reports the potential developer could receive financial support from the council.
"We don’t believe council should be offering financial incentives to new operators, particularly when there is no evidence pointing to strong demand for five-star accommodation — also when it involves using ratepayers’ money to fund potential developers at the detriment of current accommodation providers."
Mr Cull denied ratepayer money would be used for the proposed Filleul St hotel.
The council had indicated a development contribution remission was available if the hotel proceeded, money the council would not have had without the hotel.
Any developer of a five-star hotel, including Scenic Hotel, could apply to the council for the development contribution remission, he said.
Asked if he knew Scenic Hotel was considering a five-star hotel for Dunedin, Mr Cull said he understood Scenic Hotel had a discussion with council chief executive Sue Bidrose about the Filleul St site after news surfaced about a proposed hotel on the site.
Dr Bidrose told them there was an offer on the site at market value.
If the offer did not eventuate, the site would be put on the open market.
"I knew they reacted to the rumour at the time and they were interested in doing something," Mr Cull said.
Mrs Hagaman said because the Scenic Hotel group had been operating hotels in Dunedin for 32 years, it had a sound understanding of what people wanted to pay and exactly how much demand there was for its top rooms.
"Ratepayers need to know the region’s five-star market is very small."
Scenic Hotel's five-star hotel project was only viable because the company was taking a long-term approach.
It helped that the group already owned the land, she said.
Traditionally, Dunedin had low hotel occupancy percentages, averaging in the low 70% range.
Queenstown occupancies were now in the mid 90% range.
• Five-star hotels must provide enhanced services such as valet parking, concierge, 24-hour reception and 24-hour room service. These may be offered at four-star hotels but is not compulsory.
• Five-star hotels must offer luxury suites, comprising three rooms — bedroom, lounge and bathroom. Four-star hotels may offer suites but it is not compulsory.
• A higher ratio of staff to guests is expected in five-star hotels.
• In most five-star hotels, guests will expect a renowned chef.