Any seaside town worth its salt can be found in high spirits when the weather is hot, but Margate has more than one reason to rejoice this weekend.

The ailing resort's most famous daughter, artist Tracey Emin – freshly anointed as the local Olympic torch-bearer – has returned to open her first show at the pristine Turner Contemporary gallery on the seafront.

And, what is more, news has just broken that Margate will receive an extra government grant of £100,000 as one of retail guru Mary Portas's 12 pilot towns targeted for regeneration.

"It is brilliant," said Emin on hearing of the grant as she cut the ribbon on a new sweet shop in the hip Old Town quarter. "At first I thought we hadn't got the money when I heard Wolverhampton had won, but I am delighted. I want it to put Margate back on the map. It is badly needed because the town is in a tragic state."

If Brighton was once memorably described as a place "permanently helping the police with their inquiries", then much of Margate still looks as if it is on weekend release from a custodial sentence. Up the hill from the Old Town and the sparkling art gallery, the Cliftonville district remains crumbling and impoverished. Boarded up guesthouses and dingy hostels dominate.

"Anything that the middle of Margate needs, then Cliftonville needs it 10 times as much," admitted Emin.

But help may be at hand for Cliftonville, too, as the desolate Dalby Square has been earmarked for a £2m lottery-funded renovation.

"The benefits of the new gallery more or less stop any farther up the road from here," said Penny Ragozzino of the trendy Fort Café on the way to Cliftonville. "But we opened up here in October because of the gallery and our trade has been steadily growing. Lots of people from London are buying up cheap houses in Cliftonville now. It is phenomenal the number of new businesses that have started. There is a fantastic spirit here now."

Tawdry seaside towns in economic need are not rare in Britain, but what is rare is the positive impact of Turner Contemporary. In its first year it exceeded all hopes for visitor numbers, attracting half a million.

Speaking to Margate people and celebrity guests including Jerry Hall when her show opened on Friday night, Emin praised the local authority for giving the gallery free admission. "It has such a great knock-on effect," she said.

To win over those the artist described as "cynics" she wrote to each surrounding household, inviting them to see her show. The ploy has worked, with attitudes to Emin and the show generally much warmer than those of sceptical art critics.

"Tracey has made a difference and is popular here in Margate," said Margate-man Will Allsop. "It is a good beginning."

The gallery, too, has provided a focus for artistic regeneration and, as Emin pointed out, it has a secondary status as a shelter from the wind. "It is a free warm on a cold day," agreed Sarah Vickery of the town's Shell Grotto. "And it is clearly a good thing, but given that they spent £25m on it you would hope it did have some impact."

Vickery, who is campaigning for the redevelopment of the Dreamland amusement park, has watched several attempts at regeneration. While artists initially failed to move into expensive units in the Old Town, they are now colonising the cheaper area behind it. "You can't hothouse these things and just ship artists in, but the gallery has been a shot in the arm — although much of the effect so far is corralled around the gallery."

Vickery's partner, Colin Barber, who runs a vintage clothing store, highlights the lack of jobs for the high numbers of homeless Londoners and immigrants who are rehoused in Cliftonville.

Vickery agrees: "People always say Margate is so different to Ramsgate and Broadstairs. It is so edgy. But what they mean is it is rough."

Certainly it is a town that shouts out. Along the seafront, garish signs proclaim "Margate: the original seaside", "Café C Loves Tracey" or "There is no Such thing as the Dog Poo Fairy", while outside Primark a bare-chested youth with a beer in his hand calls out for passersby to admire his body. None of it is very far from the raw sentiments expressed by Emin inside the nearby gallery in her neon lights and blue paint.

Margate, loved by Turner as the home of great sunsets and of his mistress Mrs Booth, has its own kind of avant garde vibe. It is the sort of place you can overhear a discussion about whether or not dying your hair pink is a good idea when you are sunburnt, accompanied by a salty chuckle to rival Emin's own. So it seems natural that she should be chosen to carry the Olympic torch this summer. Whether she can also single-handedly deliver the future Margate is calling out for seems unlikely.

Her arrival on Friday was heralded by the descent of hundreds of international media and tourists to boost local retail sales, but she knows it is not enough and regularly calls for the reopening of Margate's caves, and the speedy redevelopment of the defunct amusement park.

Aptly, Turner Contemporary stands next to the town's lifeboat station, dwarfing its proportions, but it cannot rescue the town on its own, despite the high cost of its construction.

Time will tell if this marks the beginning of a boom for the seaside resort or just another of many ill-fated waves of optimism. As Emin told her guests on Friday night: "The last decades have not been at all kind to Margate, so it surely cannot get any worse."