London-based developer Reef Estates already has planning permission to develop land at the Technical Institute at the junction of Fordham Road and Fred Archer Way, opposite Waitrose, with flats and restaurants.

But on Monday, director Stewart Deering told town councillors that the company had changed its mind and now wanted to build a hotel instead of the 24 flats and was currently in discussions with two major hotel chains over its Newmarket proposal.

"As a result of the downturn in the economy, we had had to reconsider our proposals," said Mr Deering.

"When we looked at the possibility of developing the Conservative Club we found there was demand for another hotel in the town.

"That plan did not go ahead because the club could not find alternative accommodation."

He said the company was still going ahead with plans to have restaurants in the ground floor units and two companies have already expressed an interest in setting up businesses in the new building.

They were Ask Pizza and Chimichangas, a Mexican restaurant chain in the Prezzo group, which already has a restaurant near the site.

But Mr Deering told members of Newmarket Town Council's planning committee the hotel plan hinged on the developer being able to use the top floor of The Guineas car park for hotel guests because the £750,000 underground car park that was to be built has been shelved.

Mr Deering said surveys done by Reef Estates had shown the top floor of the car park was "under-used" and the company planned to approach Forest Heath Council to see if it could be made long-stay with spaces allocated for guests.

If that was agreed, a revised planning application would be submitted and work on the project could start in January next year.

Committee chairman Cllr Richard Fletcher said: "This is an attractive proposition for the town. A hotel would bring jobs and the restaurants would be welcomed by residents and visitors,"

And Cllr Michael Jefferys added: "We view the idea of the development favourably but you need to convince us that there won't be a problem with parking."

He suggested Reef Estates came back with further information about The Guineas parking from an up-to-date survey completed on Tuesdays and Saturdays.