Developers Ampersand have already started work on the project

About 500 holiday homes, a hotel, bars, shops and restaurants are planned for Carlyon Bay, near St Austell, by development company Ampersand.

The inquiry will only concern revised aspects of the scheme, which was given planning consent in 1991.

Work on the scheme is well under way, and the developers say there is no reason for it to stop.

An independent planning inspector to chair the inquiry.

Protesters gathered at Carlyon Bay earlier this year, claiming the development was too large for the area.

The proposed development would transform the bay

Peter Browning, spokesman for the Carlyon Baywatch group, said: "[The inquiry] will give everybody an opportunity to express their views in an open, honest and forthright way."

He added the group was happy to go along with any proposal which restricted development to the existing building footprint.

Andrew Woods, a director of Ampersand, admitted the company was "surprised" by the decision to call a public inquiry

He said the company would decide in the next three to four weeks whether to co-operate with the inquiry, or to just restrict development to the 1991 scheme, which is on a significantly smaller scale.

"The decision increases the likelihood we will go back to plan A and merely implement existing planning permissions... which would be a great shame for all concerned," he said.

Mr Woods said the initial planning permission only allowed for the refurbishment of the existing Cornwall Coliseum building, rather than its demolition and replacement by modern state-of-the-art facilities.

Carlyon Baywatch protesters are separately taking the unusual step of seeking to have the beach designated as a village green in order to halt the development.