An independent consultants’ report into the viability of re-converting The Three Cups Hotel in Lyme Regis into a hotel has found that the costs of re-conversion are so large that the scheme is uneconomic. Palmers Brewery, which owns The Three Cups, will now consult widely with the local community to find a way forward for the site.

The report by TRI Hospitality Consulting examined two possible re-conversion plans: Option A was for a hotel within the existing building with 13 bedrooms, restaurant, bar and meeting room. Option B was a more ambitious scheme to preserve the historic front section of the building while demolishing and rebuilding the rear to include 20 bedrooms, restaurant, bar and meeting room.

The report concluded that the income likely to be generated from Scheme A would allow a maximum of £830,000 to be spent on the reconversion. Option A was estimated to cost £3m leaving a huge shortfall. The figures for Scheme B were similarly uneconomic.

Nigel Jones of Chesterton Humberts, property agents for Palmers, said: ‘Sadly the affordability gap is so huge that there is absolutely no hope of anyone realistically ever being able to afford to reconvert the building into a hotel. The gap is so large that even if it were somehow possible to halve the costs, re-conversion would still be economically unviable.

‘The re-conversion costs are so high not because the building has been unused but because it needs complete re-configuration to meet modern standards and customer requirements. Radical changes would be needed to room layout and facilities; it is not a case of simple refurbishment. The fact it has stood empty for 20 years has not contributed significantly to these costs.

‘We commissioned this report with an open mind because we wanted to find out what the options were. Now we have it, everyone needs to look forward. We are therefore going to consult with the community with the aim of finding proposals for the site that are both appropriate and economically viable.’

Key facts from the report:

• Building occupies a premium site
• Tourist season in Lyme Regis has steep peaks and deep troughs, with too much demand in summer and too little in winter, restricting income potential for hotels
• Costs are huge: scheme A (reconvert with 13 bedrooms): £3m. Scheme B (some demolition and new build) with 20 bedrooms: just over £4m.
• Shortfall on scheme A of nearly £2.5m
• Shortfall on scheme B of £2.6 to £3m