A WELL-established Teignmouth Hotel could be converted into flats. The owners of Drakes Hotel in Northumberland Place have applied for permission to convert their premises into two flats after 13 years in business.

Roy and Susan Richards say they have good all-year-round trade, but new regulations mean that they may no longer be able to class their premises as a hotel.

'It's rules and regulations, because you need six rooms or more to be classed as a hotel and we only have four,' said Mr Richards. The hotel and busy ground-floor restaurant is likely to remain the same for the next two years, but change is expected as Mr Richards enters retirement. 'We are still going to be living here because we want to stay in Teignmouth.

'I don't like the idea of another hotel closing because accommodation is getting less and less, but we have still got a couple of years. 'People will be sad to see it go because we have good local trade,' he said. The town is one of the district's top tourist destinations, but accommodation has fallen to just seven hotels and 14 guesthouses. In recent years, Teignmouth has become more desirable for house buyers and properties can fetch good prices.

Bob Bailey, chairman of the South Devon Tourism Group, said it is part of an ever-increasing trend. 'It is increasingly going this way. People are finding that they can make more money when they sell up and who can blame them. People have to maximise their retirement money.

'It is a real shame because Drakes is a good hotel with good food and a good reputation,' I don't like it because every year we are losing bed space, most notably in recent years the loss of the London Hotel and the Ivy House, but there's nothing you can do to stop it because there is no policy in place to stop it,' he said.

Sally Falcao, owner of Woodside Guest House, Hermosa Road, came to the town four years ago to start up the business. 'When we came in 2002 just for a weekend we could not find any accommodation, but since then Teignmouth has lost about six hotels and guest houses. 'It means that competition is stiffer as there are fewer of us, so prices are higher than, say Torquay, where lots of accommodation keeps prices down,' she said.

'I am upset to see another one go, it has an impact on the tourist economy because people are put off by the lack of accommodation,' she said.