TASMANIA’S latest world-class hotel development is set to change the face of Hobart’s CBD within two years.

The Hobart City Council approved the development of the $40 million Palace Hotel – a move welcomed by the government and developers.

After an initial setback in planning, the 206-room Elizabeth St hotel will now be reduced in height by more than 10 metres.

Neal Mackintosh, from Tasmanian firm JAWS Architects, said the hotel development would be a great asset to Hobart and the Tasmanian tourism and hospitality sector.

Mr Mackintosh said proponent Elizabeth Tasmania was determined to develop a hotel that fits into the Hobart CBD, while taking account of local heritage considerations.

“The Palace Hotel will be an icon development for Hobart and add immeasurably to the State’s tourism and hospitality offering,” Mr Mackintosh said.

“We are pleased that the Hobart Aldermen appreciated our changes and have now approved the project.”

On completion, the Palace Hotel will provide an additional 94,000 annual visitor nights for Hobart and attract an additional $18 million in visitor spending each year.

It will create more than 60 full-time equivalent jobs while construction will provide 177 fulltime equivalent jobs.

Mr Mackintosh said the company was now working on construction plans, with the Palace Hotel scheduled to be be operational by 2018.