Istithmar bought the QE2 from Cunard for $100 million in 2007. The investment company is part of Dubai World, the state conglomerate at the center of Dubai’s 2009 financial meltdown. Istithmar has been working to reduce its debt load, and in May lost control of upscale retailer Barneys New York as part of a deal with creditors.

The QE2 will remain in Dubai’s downtown Port Rashid facility, where it has been moored for most of the last three and a half years, to serve as a tourist magnet alongside a proposed maritime museum and an expanding cruise ship terminal complex.

The ship’s fate has been the subject of intense speculation since its arrival in November 2008. Officials have long been reluctant to address questions about its future, even as it sat unused and suggestions swirled that it could be moved to South Africa for the 2010 World Cup or sold for scrap.

This past New Year’s Eve, an event planning company hosted a black-tie bash onboard that included live music, fireworks and a laser light show. That was the first time the ship had hosted a large group of guests since it pulled into port.

Britain’s Queen Elizabeth II launched the QE2 in 1967. Since it went into service in 1969, the ship has made at least 26 round-the-world voyages.

Left unclear is how much the hotel project will cost and who is picking up the tab. But Bin Sulayem insisted money wouldn’t be a problem.

Negotiations are under way with contractors, the Istithmar boss said, and he “doesn’t want to give them hints” about how much is earmarked for the project. Neither Istithmar nor the city-state’s profitable port operator DP World, which Bin Sulayem also chairs, is paying for the project, he said.