Leigh Caughey, who raised her family for 22 years in Lake Okareka before moving to Auckland, has returned to open up Ngamihi Lodge, which aims to fill a gap in the market between budget B&Bs and luxury lodges.
She found the ideal property in a six-bedroom house that had been owned by Barbara and Richard Charters for 46 years.
An interior designer, she spent eight months completely renovating the property into lodge-style accommodation, with three en-suite bedrooms, and opened for business this month.
"I did a feasibility study on what accommodation niche market I could enter," she said. "It seemed to me there was a big gap between the budget B&B and the expensive lodges - there was nothing in between those."
Ms Caughey, who lives in and hosts the lodge, said she aimed to offer luxury-style accommodation, but at a lower price.
Destination Rotorua general manager Oscar Nathan said that Rotorua had undergone benchmark-beating growth in commercial accommodation statistics last year.
"As a result it's great to see that investors are confident to develop new quality accommodation here," he said.
"Luxury lodges and bed and breakfasts provide visitors the opportunity to dive deep into the heart of a region and experience true manaakitanga or unique New Zealand hospitality."
The former owners took part in the opening formalities and spoke of the wonderful memories they had in the property.
Ms Caughey previously renovated and set up a B&B in Parnell, and said she hoped to attract international guests to stay in her Auckland accommodation, and would then encourage them to visit the lakes and Redwood Forest.
Ngamihi Lodge joins a cluster of other accommodation options at the lake, including Lake Okareka Lodge, run by Lebua hotels. Ngamihi is situated at one of the highest points on the peninsula jutting into the lake, and has 360-degree views.