Mr Pettit and his business partner, Wayne McKeague, own the historic tavern, which was established in 1882, but are swapping it with the QLDC in return for another section of the same size opposite the tavern.
In 2008, the tavern served its last drinks when the pair evicted its tenants, who had been unable to pay the rent.
Mr Pettit and Mr McKeague bought the tavern and the attached apartment about four years prior.
Mr Pettit told the Queenstown Times the council's utilities committee decided earlier this year to realign the road from the McChesney Bridge directly through the site of the tavern.
"The second lane of the McChesney Bridge goes on the upstream side of the bridge now ... directly through the tavern.
"In order to get that to work, they've got to bulldoze the tavern.
"That's an infinitely cheaper option - every time a bridge gets a metre longer it doubles in price."
Mr Pettit said he and Mr McKeague were going to do a "straight land swap", with the council, taking over a piece of the existing road.
"We own the car park on the other side of the road, so the community ends up with a double-lane bridge and dedicated bus stops."
However, plans for a "futuristic, sculptural" building opposite the tavern site had been put on hold, he said.
Initially, the pair planned to develop an underground car-parking building with two or three storeys above ground to create a community focal point.
"I would describe it as a sculptural building.
"We went to the urban design panel twice. The first time, they said 'it's not big enough; it needs to be grander and more impressive'."
The concept drawings were revised and the second time it gained full approval from the panel, he said.
"Since then, my partner and I have said under the current economic [climate] we might go out and get resource consent for a very futuristic, sculptural building and might not ever want to build it.
"We'll just ... see how it all pans out."
Mr Pettit said the works to realign the section of road between the McChesney Bridge and the tavern were set for the 2010-11 financial year, beginning July 1.
However, it was unlikely any physical works would begin until at least spring, he said.
"I've got to admit ... at the moment it [the tavern] is an eyesore.
"I'd bulldoze the thing tomorrow, but as far as I'm concerned, that's the council's responsibility."
