Senior management at CIÉ may repurchase the Great Southern Hotel in Eyre Square, Galway, for about €40 million for use with the €750 million redevelopment of the city's adjoining rail and bus station.
The CIÉ assurances come just days after concerns were raised that money raised by the break-up of the hotel chain would be diverted from Galway to Dublin.
It had been feared that the Dublin Airport Authority (DAA), which now owns the chain, would use the proceeds of a sale towards development of a new terminal in the capital.
During a meeting with Michael D Higgins (Labour), CIÉ executives offered assurances that the 19th century hotel was being considered as part of their "master plan" for the adjoining 14-acre site at Ceannt Station.
However, Padraic McCormack of Fine Gael has accused the Minister for Transport of giving an "evasive reply" to a question he posed about the ownership of the city's two Great Southern Hotels in the Dáil late last month.
He said the proposed sale of the hotels would be "a severe blow to Galway" and an "unforgivable act" if the landmark buildings were developed into other enterprises.
The Eyre Square hotel, which was once part of the station, first opened in 1852 and was known as the Railway Hotel until the foundation of the State.
"I am not at all pleased by the Minister's evasive reply to my Dáil question on the matter, which indicates that the money from the proposed sales may now go to the Dublin Airport Authority and this money, which would legitimately belong to Galway, will be used for the building of a second terminal at Dublin airport," he said.
Minister for Transport Martin Cullen TD said the sale of the hotels was a matter for the Dublin Airport Authority (DAA), which has owned the Great Southern group since a shake-up of CIÉ into separate entities such as Bus Éireann and Iarnród Éireann 20 years ago.
Mr Higgins said the proposed redevelopment of the 14-acre Ceannt Station was the "last opportunity" the city, the region, and the west of Ireland would have to address its transport needs.
He felt that the Great Southern Hotel, which adjoins the railway platform, was covered in part by the Heritage Act which he introduced during his term as minister for arts, culture, and the gaeltacht.
It is intended that the bus station will double in size to 25 bays, and the number of rail platforms will increase from one to three.