Newcastle councillors have rejected a $3 million renovation of the Beach Hotel after objections from hundreds of Merewether residents.
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Lord mayor Nuatali Nelmes told Tuesday night's council development applications committee meeting that she was concerned that the approval, if granted, would formalise a condition allowing the hotel's ground floor to stay open until 3am.
The pub's liquor licence allows the hotel to trade until 3am, but the Beaches has traditionally closed at midnight and does not have a council development approval in place which governs its hours of operation.
"My concern is that in all my time I have never known the hours of operation to go after midnight," Cr Nelmes said.
She said the hotel was in a residential precinct not known for entertainment beyond midnight.
Councillors John Church, John Mackenzie and Andrea Rufo also spoke against the development application.
Councillors voted unanimously that the matter be laid on the table until the hotel's owner submitted a revised development application addressing concerns about noise, privacy and hours of operation.
High-profile Sydney hotelier Andrew Lazarus, who owns Shoal Bay Country Club and The Exchange at Hamilton, bought the landmark Frederick Street pub in 2019 and launched plans for a new upstairs terrace overlooking the beach and upstairs live music venue.
Mr Lazarus has said he intends to keep the hotel open until 3am, prompting concern from residents that the venue will morph into a "nightclub".
The development application attracted 145 public submissions, including letters of concern from the nearby Holy Family Catholic primary school and Merewether Community Group.
The development was also the subject of a council public voice session in April 2020.
City of Newcastle staff presented a report to councillors on Tuesday recommending they approve the project.
The report said the pub's capacity under its existing development approval was 1500 patrons, which would fall to 1230 under the new proposal, though the upstairs capacity would grow from 180 to 440.
It noted that police and the council's licensed premises reference group had not objected to the development application because the capacity and licensed hours of trade were not increasing.