A group of locals, backing the owner's plans to demolish the ruins and build a new pub, has called on the council to hold a public forum to discuss the hotel's future.

But a Diggers Rest Residents Association submission to the council favoured salvaging as much as possible of the original hotel.

Diggers Rest resident David O'Connor said he had been approached by residents who, while respecting the site's heritage value, wanted to see the pub rebuilt.

They say it is the social hub of the small community.

The hotel is the subject of an ongoing arson investigation of a fire in late October which caused $1million damage. However, its owner has submitted a planning application to demolish the hotel and rebuild.

The 157-year-old hotel was a stopover during the gold rush era and is covered by a heritage overlay.

All works, including demolition, must be approved by the council.

A Facebook group has started, with about 25 members in favour of demolition.

The group is called "Start fresh with Diggers Rest Hotel - make it family-oriented". An excerpt from the group's self-description states: "Diggers Rest is a family-oriented town. Please join this cause and support our town for our future and our children's future."

Site owner Roger Smith said he would be happy to attend a forum and discuss his plans for a $1.5million hotel with the community.

Council planning manager Luke Shannon said the council had met its statutory obligations of advertising the application and inviting written submissions.

The council would consider the potential benefits of a forum, with a decision being made in the next two weeks.