Merewether residents opposed to a $3 million renovation of the Beach Hotel were celebrating on Wednesday after Newcastle council rejected the plans.
Councillors voted unanimously on Tuesday to seek a revised development application from the hotel's owner, Andrew Lazarus, addressing concerns about noise, privacy and opening hours.
Peter Fallon, one of more than 100 residents to write to the council objecting to the renovations, said councillors had listened to the concerns of residents.
"It was a fantastic outcome," he said. "It was good. It showed they're focused on getting the right outcome for the community, which is all we can ask."
Mr Lazarus' plans included a new upstairs terrace facing the beach, an upstairs live music venue and opening to the public an existing small terrace facing Ridge Street.
The development application attracted 145 submissions, including letters of concern from the nearby Holy Family Catholic primary school and a Merewether community group.
Lord mayor Nuatali Nelmes told Tuesday's meeting that she was concerned that the approval, if granted, would formalise consent for the hotel's ground floor to stay open until 3am.
The pub's liquor licence allows the hotel to trade until 3am, but the Beaches has traditionally closed at midnight and does not have a council development consent in place which governs its opening hours.
"In all my time I have never known the hours of operation to go after midnight," Cr Nelmes said.
She asked council staff to show how the pub's hours of trade had been addressed in historical development approvals for the site.
Councillors John Church, John Mackenzie and Andrea Rufo also spoke against the development application.
City of Newcastle staff presented a report to councillors recommending they approve the project. The pub's capacity under its existing development consent is 1500, which would fall to 1230 under the new proposal.
The report noted that police and the council's licensed premises reference group had not objected to the development application because the capacity and licensed hours of trade were not increasing.
