A predicted surge in tourists from China is fuelling demand for quality accommodation in Dunedin.

The Dunedin City Council is considering the development of a multi-million dollar hotel in a council owned car park opposite the Town Hall.

Mayor Dave Cull said the investment will be well above the $20 million mark, and potentially financed from china.

"There's likely to be a considerable increase in the number of visitors, particularly from China, but not just from China. The tourist accommodation infrastructure and other kinds of tourist infrastructure need to be ready for that."

"We don't have anything of international 5 star quality in the city at the moment."

"But the demand in the city, both from tourists and people coming to events, is pretty high."

Dave Cull said he's unable to shed light on any further details.