The council has missed out on government funding and may have to find an alternative way to plug a £7m viability gap on its plans to redevelop the grade two-listed former Abingdon Street post office into a 148-bedroom hotel.
Ashall Projects is delivering the project in partnership with Blackpool Council and Indigo Hotels Group.
Consultancy CBRE identified that extra cash was needed to deliver the project when carrying out a viability appraisal.
Blackpool Council had bid for a share of the government’s £4.8bn levelling up pot to fill the funding hole but has learned it was unsuccessful.
Mark Ashall, director of Ashall Projects said he was “disappointed” that the Levelling Up Fund application had failed, adding that the company was now “reviewing our options with respect to funding arrangements.”
The council has said it may yet resubmit the scheme for consideration when the second round of Levelling Up Fund bidding opens in spring.
Cllr Mark Smith, cabinet member for enterprise, business and job creation said: “We were disappointed but Blackpool is still eligible for two more Levelling Up Fund bids and is awaiting the launch of the second round of bidding.
“We are committed to seeking a way to ensure the delivery of this scheme and are now actively exploring with Ashall Projects other means of securing this development through different funding structures.”