The town is built around a popular hot spring which was discovered in the late 19th century. The hot springs were produced by the fractured rock bed along the Hanmer fault.
Hanmer Springs' Queen Mary Hospital, the South Island's leading rehabilitation centre for sufferers of drug addiction, was controversially closed in 2003. The premises were purchased by the New Zealand Department of Conservation in 2008.
In 2009, a 4600 square metre extension to the hot pools complex was proposed including �a second [16m high] water-slide, ice-skating rink and relocating and reconfiguring the freshwater pool.� During the consent process oppositions were made to it by, among others, the Queen Mary Reserve Trust concerning the expansions effect on noise levels and visual impact. Concerns were also raised by former hospital superintendent, Dr Robert Crawford, about the change the development might have on the village�s brand of �slow tourism and relaxation, not wet�n�wild.�
After a hearing from independent Commissioner Robert Batty, on Monday, 18 January 2010 the proposal was approved. �The freshwater pool, new buildings, water slide/super bowl and the aqua play/ ice skating area are all to be on land from the subdivision of Queen Mary Hospital land
