Very sensible suggestion, Bucks. I'd like to see that happen. And why not?
Start redeveloping the structure from the ground up. Recruit a few trendy chain stores (or better yet, maybe some locals could establish their own trendy shops) and help the old hotel become an area "hot spot". It's happened time and again in other cities. A beautifully designed and decorated coffee shop/wi-fi lounge would be a good starting point. Then maybe a really good bistro or sandwich shop. Then maybe an apparel establishment or two (that would appeal to the "trendy" set). From there, re-do the hotel section and transform many of the rooms into appartments or lofts.
I know, I know. I'm getting way ahead in the game. There are fire codes to consider, parking space concerns, etc. Not to mention a ton of money to refurbish and bring the structure up to modern code. But it doesn't hurt to dream big, does it?

I wish the Preservation Alliance the best of luck and I give them a bucket-full of encouragement.