A further feasibility study ordered by councillors in the summer has concluded that a four star hotel is not currently commercially viable on the site.
Instead, councillors on Policy and Resources Committee will, next Wednesday 13 November, consider a recommendation to hold the site as open space until the demand for a four star hotel has increased.
Council Leader and Chair of Policy and Resources Committee Gavin Callaghan said: "We always said the deal we had been presented with earlier this year demanded greater scrutiny. The risk of selling land for £1 in the hope of a four star hotel, even when no agreement was in place, was too big. We can't gamble with taxpayers assets and money and we won't.
"This feasibility study we have commissioned has now proved that, as the market currently stands, we can't make any deal for a quality hotel stack up in a way that offers value for money for taxpayers.
"I would still love to see a four star hotel in this borough - it deserves one and it will get one - but when the market is right. Let's focus first on creating the conditions for a thriving economy by investing in our town centres and attracting new businesses and new jobs to our area - demand for a hotel will then follow."