Demolition machines today began to chip away at the main tower of the building, which has dominated the view from Charter Square for decades.
The building should be gone by the end of the spring, at which point construction on the first phase of the new retail quarter will begin.
The hotel is making way for a new six-storey office block and a range of ground floor shop and restaurant units. The office block will become the new home of HSBC.
Sheffield Retail Quarter on the rise in 2017Nearby Charter Square will be completely redesigned, with the roundabout replaced by a single road and a new pedestrianised area that will feature cafes.
The second phase will involve the demolition of the bulk of buildings between Barkers Pool and the new office block, and the construction of a range of new units - including a new multi-storey car park and a department store which the council hopes will house John Lewis.
A planning application for the second phase has yet to be submitted.
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