Melbourne City Council is likely to sign off on the project next week, which would see the back 30 metres of the existing building demolished to make way for a modern addition.

Originally the owners of the hotel had asked to build a much larger skyscraper of 183 metres, but amended their application in April for the prime CBD site.

As well as 77 hotel rooms, the 30-storey redevelopment will include 62 residential apartments.

Council officers have recommended Melbourne councillors grant a permit for the project, finding the design would not detract from the neighbouring Shell House at 1 Spring Street, designed by prominent Australian architect Harry Seidler.

The current five-storey Lindrum Hotel building is thought to date back to 1900. Over the years it has been home to tea and coffee merchants Griffths Bros Ptd Ltd, newspaper publisher the Herald and Weekly Times and a billiard centre.

It opened as Hotel Lindrum in 1999 and is now managed by Accor Hotels.

Melbourne Heritage Action president Tristan Davies said he believed the building was abandoned for some time.

"It was badly looked after and there were windows missing," Mr Davies said. "It was quite a good thing when they turned it into a hotel and in that sense I suppose it is good it is staying a hotel."

While Melbourne Heritage Action submitted an objection to the latest plan for the hotel, dubbing it a case of facadism, Mr Davies said the heritage lobby group were  not totally against the development of the block.

"I'm sure they can improve the plans and have a tower still," he said.

Melbourne City Council will vote on the permit application next week.