Russell's Duke of Marlborough is celebrating a milestone this weekend in a seven-year transformation its owners hope will place it among the top five boutique hotels in the country.

When Otago University friends Anton and Bridget Haagh, Riki Kinnaird and Jayne Shirley bought the Duke in 2010 it was unloved, adrift and all but boycotted by locals.

Since then the two couples have poured an estimated $10-12 million into the Duke and other projects in Russell and Paihia, won back local loyalty, and returned the iconic hotel to its former glory.

Otago University mates Anton and Bridget Haagh, Riki Kinnaird and Jayne Shirley bought the Duke of Marlborough seven years ago. Photo / Supplied
Otago University mates Anton and Bridget Haagh, Riki Kinnaird and Jayne Shirley bought the Duke of Marlborough seven years ago. Photo / Supplied

During two months in late winter 20 bathrooms were replaced, the kitchen and restaurant were upgraded, a first-floor balcony was built and a turret was added above the entrance.

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An area between the Duke and the old Customhouse, previously used for parking and vehicle access, is being turned into a garden for weddings and outdoor dining.

And they're not finished yet, Mr Kinnaird said.

Phase two of the rebuild - in consultation with Heritage NZ and specialist architects - would see the rear of the hotel transformed to mirror the front but with extra rooms instead of the restaurant.

The couples' aim was to have the Duke ranked among New Zealand's top five boutique hotels, alongside the likes of Eichardt's Hotel in Queenstown.

The Duke's restaurant was already in the top 20 in the country for quality and turnover, serving 150,000 meals a year or 1400 a day at the peak of summer, Mr Kinnaird said.

They had also created a new restaurant on Paihia Wharf, Charlotte's Kitchen; bought the former Triton Suites on Wellington St, turning it into the Duke Motel; and bought land on York and Church St, allowing them to shift parking off the prime waterfront site, build a gym and commercial laundry, and solve their most pressing problem, staff accommodation.

They also planned to turn the Masonic Lodge into backpacker-style accommodation for staff.

Currently the Duke employed 70 permanent staff and 140 in peak season. By this time next year it would have 140 permanent staff and 210 at peak.

Mr Kinnaird said a function at the Duke this weekend was a way of celebrating the transformation as well as thanking supporters.

"This didn't happen with just the four of us, it happened with a huge amount of support from the local community, the banks, our suppliers, Harnett Builders and locals who built the extension and 20 bathrooms in eight weeks ... It's a chance to pat everyone on the back and say well done."

The party would also mark 190 years since the first hotel on the site, called Johnny Johnston's Grog Shop in what was then lawless Kororareka.

Mr Johnston, a reformed convict, later changed the name to the more upmarket Duke of Marlborough.

In 1840, with ink barely dry on the Treaty, the Duke was granted New Zealand's first liquor licence.

The first Duke of Marlborough burnt down in the Northern Wars of 1845-46. At least one of its successors also went up in flames.

Today's Duke began its life around 1900 as an accommodation block at Cable Bay for operators of New Zealand's first underwater telegraph cable. It was barged to Russell about 1932.