The hotel will go at the corner of Water and Queen streets. (APM)

Charlottetown city council gave planning approval Monday night for a $22 million hotel to be built close to the waterfront.

The six-storey building — at the corner of Water and Queen streets, kitty corner to the Delta Hotel — will include 120 guest rooms, 14 apartments, and six condos.

Council had to vote to allow for some breaking of the rules for the development to go ahead, including a variance for the building's height.

"It's going to be large. I mean there's no question the scale of it," said planning chair Coun. Kim Devine.

"The Kays building will be incorporated into it, and I think what they tried to do was to make the newer parts to blend in and to be compatible with the style."

Council is also allowing developer APM to make a cash payment in lieu of parking spaces that would under normal circumstances have to be built along with the project. Under city bylaws, a development this size should require 184 new parking spaces. The plans include taking away some exisitng spaces by building on a small parking lot on King St.

APM will pay the city a little more than half a million dollars in lieu of 118 of those parking spaces. It will have room for 66 vehicles in an underground garage.

Council unanimously approved the exceptions.

Mayor Clifford Lee said council will now have to decide how to spend the money.

"At some point in time that money will be allocated towards either expanding our current parking garage facilities or building new parking garage facilities," said Lee.

There is still one more hurdle to clear before construction goes ahead. APM owner Tim Banks said he'll be waiting to break ground until he knows for sure that a new convention centre, on the waterfront just one block away from the planned hotel, is going ahead.

If that does happen, Banks said he hopes to open the doors to his new hotel by the summer of 2011.