Hoteliers fear they could be driven out of business if plans for a new hotel go ahead.
Proposals have been drawn up to build a 64-room hotel, to be run by a national chain, on the south east corner of the Spanish City island in Whitley Bay.
This hotel is going to bring nothing to the Whitley Bay economyFrank Austin
Residents and hoteliers were invited to a consultation event last week with Robertson, who are leading the plans for the regeneration of the site.
But hoteliers say there is no demand for a new hotel.
In recent years, the number of hotels and bed and breakfasts in Whitley Bay has dropped from 60 to just ten.
Business owners say the problem is down to no attractions in the town, while there has been a drop in trade from stag and hen parties and, more recently, construction workers.
Hoteliers have been raising their concerns with local resident and Conservative party member Frank Austin.
He said: “The original plans for the Spanish City site never had a hotel in it.
“It was going to be a sheltered housing scheme but now they are building this hotel.
“Why is there a rush to put a hotel there before anything is in place for the Spanish City or anything concrete drawn up in the plans?
“At the minute, the Dome looks like it’s going to be nothing more than a shopping mall or a soft play area and creche.
“We need something there that attracts people in so it will benefit the whole town and bring people to the current hotels.
“This hotel is going to bring nothing to the Whitley Bay economy.
“All of the small hotels and B&Bs buy their produce in the town, this new hotel is going to have everything delivered from outside.”
Mr Austin added: “There is only about 130 beds in Whitley Bay but this new hotel will have 240, at four per room.
“This is their livelihood.”
Plans for the new hotel are expected to be submitted to North Tyneside Council next month. If approved, work is expected to start on site next March and the new hotel opening in February 2017.
A council spokesperson said: “We are working with our partners to deliver a successful and vibrant future for the seafront at Whitley Bay as part of our £36m Master Plan, and ambitions for a high quality hotel next to the Spanish City Dome currently feature in those plans.
“The development is being proposed by Robertson’s, who recently carried out consultation on their plans for the site, which included seeking advice from the council’s planning team on the proposals.”
No one from Robertson was available for comment.