The hotel will be located at the Kovšu lake near Rēzekne, a town of some 30,000 people which is often called the 'capital of Latgale'.
It will be part of a tourism cluster that aims to increase the number of winter guests staying at the town.
"Building a 100-room hotel and spa is but a part of our concept for developing tourism in our town. The next part is creating a tourism cluster, uniting all tourism companies under a single organization, possibly the 'Ezerzeme' association," said Rēzekne mayor Aleksandrs Bartaševičs.
He stressed that the hotel will also provide rental space for companies, a move aimed to cut the unemployment rate in the city. It currently stands above 20%.
The costs are expected to be above €9m, with a third covered by EU funds, a further €3m invested by the municipality and another €3m by a private investor.
Rēzekne is also home to the stunning Gors concert hall unveiled in 2013.
