The two organisations plan to develop a link between the Kelvin Hotel and SIT's proposed 47 apartment build to create a fully operational training hotel - a New Zealand-first.
"Short of the word exciting, I don't know what else you can add to it. It's two community organisations working together with a total focus on the community," ILT chief executive Chris Ramsay said.
Southern Institute of Technology chief executive Penny Simmonds said the buildings would include a "hybrid" of facilities.
"The second floor of the hotel onwards will line up with the apartments to provide "seamless movement" between the two buildings."
It would allow SIT students to gain hands-on training across a range of disciplines, from front-of-house to work as a chef, hotel management and event management, she said.
The apartment build was set to begin in 2020-21, and the goal was to integrate with the Kelvin Hotel in 2021.
Ms Simmonds said she hoped costs for the apartments would not exceed $20million.
"The costs will be coming from our reserves. Depending on how things align after that, we'll have to do separate costings."
Mr Ramsay said the ILT would share the costs.
After staying in a training hotel in Hong Kong, Ms Simmonds presented the idea to the ILT in 2015.
It was considered when the concept for The Langlands Hotel was being developed, but it did not fit the hotel's "footprint" at the time, Mr Ramsay said.
"Now it's progressed well enough with the CBD redevelopment, that space isn't the issue that it was."
Invercargill Licensing Trust chairman Alan Dennis said the benefits of the training hotel were two-fold.
"Obviously, the idea is to train new people in the game but with 700 employees we'll leverage or piggy-back on that every opportunity we get ... it can only help upskill our own staff, too."
Ms Simmonds said she was not concerned about the future of SIT and the implications it could have on the collaboration.
"I can't imagine that any change in the polytechnic sector is going to take that sort of training from a region that has such big needs."
