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Wreckers have reduced the two-storey building on the corner of Prince Albert and Victoria Rds to a single-storey shell in the first stage of a rebuild from the ground up.
A spokesman for property owner Grant's Motels Ltd, Andrew Hocken, said last night the old hotel was making way for a smaller neighbourhood bar, due to open by September.
Much of the site would become car parking, but would be transformed later by further "exciting, but still secret" plans.
The hotel, bottle store and accommodation business closed on March 1.
Business lessee Nicotz Ltd, owned by Patricia Bryce and David Kane, was placed into liquidation a day later.