Mr Chapman also asked to buy the land off the council but that issue was not addressed at Tuesday’s council meeting.
Mr Chapman wrote to the council in January for permission to build two oval cabins and two motel studios and to ask to buy the land at the site.
"With the accommodation shortage ... we would appreciate this being moved along at your earliest convenience," he wrote.
This week, the council’s assets group manager Neil Jorgensen said while the council recognised there was an "urgent need" to allow for more accommodation in the area, selling reserve land included "a whole range of complexities" and could not be considered on short notice.
"We can’t just negotiate a purchase and have it ready in a couple of weeks," he said.
But he said the urgency of the situation showed "another good sign of the business growing".
Mr Chapman could not be reached for comment after the decision on Tuesday, but on Monday he said he was booked out until the end of this month and had been turning people away.
"As Wanaka’s getting busier, people are getting further afield," he said.
"Tekapo and Twizel are booked out until the end of April pretty much."
