The former Castle Harbour hotel may have to be demolished to make way for a new $200 million luxury resort on the site.

Knocking the 70-year-old building down is one option being considered after the true state of its infrastructure and the cost of renovations -- which rose from $50 million to $78 million -- became evident.

It is understood there are many difficulties with upgrading the 1930s fabric, not least the condition of some of the areas and the inefficient layout of the interior.

At present, Bermuda Properties Ltd. (BPL) are weighing up the costs of all the options before them as efforts to secure financing continue. They still hope to have a hotel open by 2002.

The development decision could rest on the price of the two alternatives -- and an influencing factor could be that costly renovations would still leave management dealing with the 70-year-old structure.

Yesterday, BPL's Peter Parker said the scheme was still moving ahead but admitted they were making slow progress.

He confirmed demolition was one option being considered at present.

And he said they were still trying to secure the financing, adding that a stable US economy for the next two years was vital to the success of the building project.

"We all thought something would have happened by now,'' he said.

"Financing for a major hotel development is a very, very difficult thing to do and until it is in place we don't have a deal.

"The one thing that worries me is that we have a booming market, a US economy that is very vigorous and healthy. If we get a down turn in the world economy, that could have a devastating effect for our development.'' Mr. Parker said he hoped that the economy would stay constant whilst the project was being built and opened for business.

And he commended the Department of Tourism for their assistance in the project.

Once open, the planned five star resort would be more recession proof than other types of hotels, he said.

Financing for the hotel, in the form of equity and debt, is coming from overseas and Bermuda.

Government announced a $30 million "sweetener'' for the proposed hotel, with concessions on drinks, payroll and land tax.

Originally Tourism Minister David Allen proclaimed that the builders could be moving in as soon as the doors closed on the Marriott Castle Harbour Hotel, last November.

Regent International Hotels are reported to have sent a letter of intent to potentially become the managers of the new resort.