Milestone Hotel owner Neville Blair said the alterations and extension were needed because bistro trade had outgrown one of its most important features.

"We have to double the size of our kitchen in order to continue to serve the quality of meals that people expect from the Milestone," he said.

The first major change to the hotel since it was opened by Mr Blair in 2005 also presented an opportunity to recreate the atmosphere of the 19th century.

As owner of the heritage-listed item formerly known as the Kemwah building, they were always on the look out for ways to enhance its character, Mr Blair said.

"Recreating the verandah around the front of the building as it was in 1881 has always been in our long-term plan," Mr Blair said.

The two-storey brick structure that has stood firm on the corner of Macquarie and Bultje streets for 130 years was listed on the state heritage register in 1999, after being subject to an earlier conservation order.

If walls could talk, visitors would hear stories about times as an earlier hotel, a casino, a boarding house for old men, a private family residence and shops and eateries.

Mr Blair said they also intended to provide some additional seating areas to cater for growing demand.

The development application lodged with Dubbo City Council last month also included plans for storage, delivery and parking areas to the ground flood.