Co-owner Rick Pettit, of Queenstown, said plans for the Gorge Rd site would be considered more carefully once the road had been realigned and the nearby one-lane McChesney Bridge had been widened to two lanes.
He said he was also waiting for "buoyancy" to return to the Queenstown development market.
"The bridge is a nightmare over winter - a two-lane bridge would be infinitely safer."
Council project manager Lane Vermass said the project was slated to begin in March or April next year, but the council still had to negotiate a land swap with Mr Pettit and co-owner Paul Halford, of Auckland, before the shape of the new alignment could be finalised.
The council had budgeted $2.5 million over two years for the realignment and bridge-widening, Mr Vermass said.
"The whole idea of the project is to increase safety. The bridge might incorporate a cycle lane. It's all designed to get people to use that road in a much safer way - not just for vehicles but also for cyclists," he said.
The tavern, which closed in September 2008, was established in 1882.
