Developers are considering their next step after proposals to demolish run-down hotels and replace them with apartments were thrown out for the third time.
The £7m scheme to demolish the Kimberley, Waldorf and Henderson Hotels on Wimbourne Place, South Promenade, had been scaled back further in the hope of securing planning permission.
Despite being recommended for approval by planning officers, councillors on the planning committee voted by four votes to three to refuse the application.
They ruled the development was over-intensive and the proposal for 84 parking spaces for 91 flats was not enough.
Councillors also said the scheme was contrary to policies designed to protect the holiday area.
The Kimberley Hotel has been closed and boarded up since 2011, while the Henderson is also no longer trading.
Following the decision, town planning consultant Simon Richardson, who addressed the committee on behalf of the hoteliers, said: “It is very disappointing and it was a close vote, four to three in favour of refusal.
“We will have to consider what to do next.
“There are various options – we could appeal or put in a revised application.
“The building was scaled back in various ways for this application, and is not dissimilar in height to the existing buildings and quite similar in height to the consent already granted for a Hilton by Hampton hotel.
“Two of the hotels are not trading and they are finding life quite difficult in particular at this location.”
The latest application saw the number of flats reduced from 99 to 91, a reduction to the length of the seventh floor by five metres, and to the sixth floor by 26 metres, and the removal of balconies from the majority of flats which would face Clifton Drive.
The first bid to redevelop the site with 166 apartments was thrown out by the council in 2009, while in May this year, an application for 99 apartments was rejected because councillors said the proposed 84 parking spaces were not enough and the development was over intensive.
Seven objections were received to the amended plans, mainly from people living on Clifton Drive.
They say the the height and size of the building would still have been too big and would impact on the privacy of residents, and added concerns remained about the amount of car parking.
However the closure of businesses has led to the area being the target of vandalism and arson attacks.
Blackpool-based Create Development has planning permission for an £8.5m scheme to build a four-storey 130-bedroom hotel on the site of the vacant Palm Beach and Bourne Hotels, also on Wimbourne Place.
Demolition of the fire-ravaged Palm Beach and the nearby empty Warwick Hotel is due to be carried out.