Tauranga's central city hotel development is too rich for Tainui Group Holdings which has abandoned the deal.

The planned hotel site on Durham Street.

Tauranga City Council is today advising that tenderer TGH is unable to proceed with the central city hotel and conference centre planned for Durham Street as it will be too costly.

TGH chief executive Mike Pohio says the decision is financially driven with capital costs well in excess of the $26 million allowed for in the independent economic impact assessment, commissioned by Tourism BOP and Priority One.

'We have an excellent working relationship with Tauranga City Council and they have assisted us every step of the way.

'This is a business decision which is the result of a need to meet financial criteria for TGH,” says Mike.

In early 2013 THG was selected by Tauranga City Council as the preferred tenderer for the development.

An independent economic impact assessment, commissioned in December 2012, showed that a $26 million international standard hotel would provide strong economic benefits to the city and sub-region. The report also highlighted that every dollar of hotel revenue would generate $1.26 of flow-on revenue in the Western Bay of Plenty, says TCC.

Tauranga Mayor Stuart Crosby says Council is now working with another potential investor on the future development of the site.

'We are confident that a new hotel development in the city centre will provide real and lasting benefits to Tauranga.

'The hotel development is one of several key infrastructure projects that are being pursued by Council due to their potential to be a springboard for significant investment in Tauranga,” says Stuart.