A NEW 100m tall luxury hotel would be built on the site of the former Palace Theatre near Parliament House, under plans submitted to the State Government.

The proposal for a $180 million W Hotel on the Bourke St site is being billed as a major boost to the economy and a chance to re-energise the eastern end of the CBD.

Development manager Sinclair Brook said the project would create hundreds of jobs and woo high-end tourists and business people to Melbourne.

But a 31-storey tower a stone's throw from the parliamentary precinct may also court controversy, particularly after the Windsor Hotel redevelopment debacle three years ago.

The Windsor redevelopment for a 91m tower was approved by the Brumby government, but questions were raised about the planning process surrounding a major development in a sensitive area.

The project for the Palace Theatre site, which housed the Metro nightclub in the 1990s and is owned by Jinshan Investments, would be managed by hotel group Starwood if approved.

It would bring to Australia the first W Hotel, a relatively young brand of the Starwood group, which also runs Sheraton and Westin hotels.

Sinclair Brook development manager Tim Price said Bates Smart architect Roger Poole had designed a classical building that would not overshadow Parliament.

Views of Parliament and other landmarks had also been respected, he said.

"There's been a lot of work done in working through the volume of this building, to ensure that we don't step into those viewlines," he said.

The building would include 205 hotel rooms and 145 apartments.

Mr Price said it was an expensive project and was fairly rare in Melbourne and Australia, where not many high-end hotels were built from scratch.

He said the project would add a multi-million-dollar property to Melbourne "in an unparalleled location".

"The hotel and apartment development is expected to contribute up to $394 million to the Melbourne economy in its first 15 years of operation," he said.

Developers say the project would bring 300 construction jobs.

Hundreds more jobs would be generated once the hotel was up and running, which could lead to a boost of up to $58 million to the state's economy in the first year.

matthew.johnston@news. com.au