A cash injection of £6.3 million could restore a derelict Carlisle hotel – and see it open within three to five years.

Fresh hope has been given to those campaigning to save the ownerless Central Plaza Hotel, after a feasibility study concluded that renovation would be more cost-effective than demolition.

Since its closure in 2004, the 65-bedroom hotel on Victoria Viaduct has stood empty and crumbling, with the huge building becoming a magnet for homeless people and vandals.

Now a leading figure in the city’s business community has outlined his vision for the hotel, with backing from Carlisle City Council.

He says it could be transformed into a museum telling the story of Carlisle’s historic State Management Scheme, when the area’s pubs were taken into state ownership.

The Central Plaza – among the scores of pubs and hotels taken over in 1916 in a bid to curb drunken behaviour – was considered a jewel in the crown of the unique project, which continued until 1973.

The £10,000 feasibility study, funded by the Heritage Lottery Fund and carried out by Carlisle’s Black Box Architects, examined the likely costs of three possible options for the building: total demolition, partial demolition with some rebuilding, and total renovation.

At least two potential developers are now interested in taking on the project, which would be made possible by grant funding.

Viv Dodd, secretary of the Carlisle City Centre Business Group, who has led the project to examine the hotel’s future, said: “The report shows that the best option is for the building to be restored.

“It makes sense for the Central Plaza to be restored back into a functioning 65-bedroom hotel, incorporating a State Management museum on the ground floor and basement, aimed at the tourist market.

“The report shows this is the best option financially.

“It would cost £5 million to demolish the building – and there would be no grant funding available for that option and you’d be left without any kind of asset.”

He continued: “But it would cost £6.3m to restore the hotel to the point where it could be taken over by the partner developer – and given the heritage aspect, the majority of that cost could be met by grants.

“So restoration with a State Management theme is the perfect solution. I walk past that building every day, and I see the state it is now. It would be a huge shame if the building was lost.

“This is an opportunity to do something exciting.”

Mr Dodd said the State Management story is a fascinating tale, unique to Carlisle, which should be told.

“There are so many facets to it,” he said. “The human stories, the architecture that was involved, the introduction of food in pubs. It’s part of our heritage and this project could help us turn the Central Plaza and our history into a real asset for Carlisle.”

Mr Dodd said two developers are assessing the project, which could see the hotel back in use within three to five years.

Colin Glover, leader of Carlisle City Council which spent £77,000 on making the building weather-tight, said the feasibility supported strongly the view that the building can be saved.

“Over the last couple of years, we have put a lot of work into finding a solution,” he said. “Doing nothing wasn’t an option.

“We always knew it would be a long journey.

“Now we’re starting to see a glimmer of light at the end of the tunnel.”

Mr Glover said at least a couple of players have not been fazed by the hotel’s poor current condition and share his and Viv Dodd’s vision of a Central Plaza restored to its former glory.

He added: “People are telling us that yes, we can do this.”

Work on the feasibility study was led by Carlisle’s Black Box Architects, whose director Malcolm Wilson said: “Demolition came out as the most expensive option – one of the main reasons being that it would involve major road closures and there would be no funding for it.

“Despite the way it looks, the building is pretty sound.

“It’s unique, with a lot of interesting architectural features. It needs to be brought back to life.”

The Central Plaza Hotel project team has also had support from The Prince’s Regeneration Trust.