POULSBO — A prospective buyer for the City of Poulsbo’s former city hall site has ended purchase discussions with local officials, but not before sparking conversation on whether a hotel belongs in the downtown corridor.

Last month, city leaders paused a plan to tear down the former city hall on Jensen Way in order to court a potential buyer interested in building a hotel at the site. No deal was reached and demolition will proceed, Mayor Becky Erickson said.

That leaves the old city hall site, as well as at least two other vacant downtown properties, open for future development. Officials, including Erickson, are taking initiative to draw a lodging business to Front Street, filling a void created a half-century ago with the exit of two hotels that, in their prime, were gathering places for the community.

“People come from large distances for unique shopping. We have a reputation of being a very quaint and interesting little community. I think they’d come to stay overnight,” said Erickson, who began calculating the potential profits of a hotel situated downtown months ago.

Working with the Kitsap Economic Development Alliance, she is putting together materials to market Poulsbo to select hotel chains. She expects to deliver those materials in the next few months.

Erickson said the new City Hall has the potential to serve as a conference facility and a draw to corporate and nonprofit groups who wish to hold multiple-day events in Poulsbo. The city has fielded several requests for use of its building since opening last fall, and a hotel downtown would provide lodging for visitors within walking distance.

“I think there is a market here for it,” she said.

There was a market of a different kind in Poulsbo’s early years, when three hoteliers established businesses that catered to traveling businessmen and loggers looking for work in the area.

The Olympic Hotel opened in Poulsbo sometime around 1890 and remained in business as late as 1954, when it began leasing portions of space to businesses and more permanent residents, said Judy Driscoll, author of “The Spirit of Poulsbo.”

The Poulsbo Hotel, built in 1894, was open for only a decade on Front Street before being sold and turned into a home.

The Grand View, a 22-room hotel at the edge of Liberty Bay, where the Sons of Norway now stands, opened in 1907 and remained a hotel into the 1950s, when its owners tried but failed to modernize. The building was torn down in 1969, Driscoll said. At one point, Poulsbo’s telephone operator worked out of the lobby of the Grand View.

“It booked itself as the most grand hotel in town,” Driscoll said.

Both the Grand View and the Olympic ran restaurants, and a barber shop was situated in the Olympic, catering to locals as well as visitors. The two hotels sustained a healthy competition for years.

They declined as transportation became more effective and there was less need for businessmen to stay overnight in the area. Also, with the 1950s came the advent of the roadside motel, offering easier access to lodging than downtown establishments, Driscoll said.

But these days, visitors are looking for an ambience in their lodging experience, and would seek out a hotel in the Scandinavian-decked heart of Poulsbo, suggested Adele Heinrich, executive director of the Greater Poulsbo Chamber of Commerce.

“We have people that want to stay downtown, they want to park their car and just get out and walk,” Heinrich said. “I think (a hotel) would increase tourism, I really do.”

City Councilman Ed Stern has also championed a downtown hotel, calling it the “highest and best use” of vacant properties there. Aside from the old city hall, an entire city block is listed for sale at Front Street’s northern edge, and the police station parcel at Front and Hostmark streets will most likely be vacant by the end of the year.

The idea of a downtown hotel didn’t strike a promising chord with employees of the Poulsbo Inn & Suites, who worried adding an additional lodging business would decrease customers for existing hotels that already struggle to fill rooms.

“You’re cutting the pie even thinner,” said Shawna Seals, sales manager at the Inn & Suites. “We’re not even filling the hotels we’ve got.”

Seals said the number of leisure visitors to the area has trended downward over the past five years, and the area’s three main establishments — the Inn & Suites, the GuestHouse Inn & Suites and the Clearwater Casino Resort — have had to fight for patrons.

“We used to all be in it together, now we’re all competing,” Seals said.

Inn & Suites general manager Terri Douglas said she’d prefer to see some sort of family activity attractions installed downtown to encourage tourists, instead of another hotel.

“I don’t think it’s in the best interest of the town right now. We can’t support another hotel,” she said. “We’ve got to have something going all the time to keep people coming back.”