The Queenstown Lakes District Council utilities committee has approved $4.39 million for stage two of the Gorge Rd upgrade which will realign the road directly through the tavern site and widen the McChesney Bridge to two lanes.
Rick Pettit has co-owned the tavern since 2005.
"I was a councillor when I put the proposal of buying the tavern and realigning the road to the chief executive and mayor. When they said council was unable to do it, I thought that it was absolutely essential to sort out some fundamental issues at Arthurs Point," he said.
Mr Pettit and business partners Wayne McKeague and Paul Halford bought the tavern and land.
He said they had to wait a long time for the council to decide to realign the road, which held up their development plans.
The car park site opposite the tavern was a "totally unique site" for a new development, he said.
"I can not think of a more dramatic site suitable for a commercial building in this district.
So I thought I would make it a win-win situation for everyone if we bought it.
"Four years later, it is great to see council progressing to a point where the realignment can finally take place. I think it works well for the community."
He is proposing a retail, office, visitor accommodation and residential development at Arthurs Point.
The proposal is to demolish the hotel, realign the road and build a complex along the lip of the cliff between the new road and the Shotover River.
He had plans drawn up, which were approved by the council's urban design panel, but had not proceeded to the resource consent stage yet.
"I don't thing anyone is in a hurry to build at the moment," he said.
The plans included a "modern stylised" new tavern, apartments and shop.
It would be a focal point for the Arthurs Point community.
"At the moment you can't buy a newspaper or bottle of milk at Arthurs Point," he said. An archaeological assessment prepared by Queenstown heritage architect Jackie Gillies and presented to the Historic Places Trust found some detail on the eaves of the tavern were the only items of any archaeological or historical merit.
"I'm quite happy to give them to anybody who wants them. Unfortunately, there's not a lot of the historical building left," he said.
Most of the building dated to the 1980s.
The trust had issued an "archaeological authority" which had to be complied with, he said.
If anything dating pre-1900 was found during the construction the trust had to be notified.
Mr Pettit said the site where the new buildings were proposed had been an orchard in the late 1800s.
The council's infrastructure strategy manager Denis Mander said the road at Arthurs Point needed to be realigned after 23 crashes at the spot over the past five years.
The upgrade would also improve provision for bus stops, pedestrians and cyclists, and improve drainage, he said.
Urban design panel chairman Lou Alfeld, in his report on the new development, said the proposal was a " stunning concept" and "exciting proposal".
"The panel finds the revised proposal an imaginative and practical solution for a difficult site.
"The revised roadway alignment, combined with the altered building, position appears to provide a much better design solution," he said.
However, Lakes District Museum archivist and researcher Karen Swaine asked if the re-alignment of a road took precedence over preserving historic buildings.
"I believe the Arthurs Point Hotel [Arthurs Point Tavern] and what is now Gantleys Restaurant are the last surviving buildings among many hotels that existed during the gold rush years along the Queenstown-Skippers Rd.
Does a road alignment take precedence over preserving buildings of historic value?" Ms Swaine asked.
The Gorge Rd upgrade is included in the council's plan for the 2010-11 financial year.
