THE iconic Rainbow Beach Hotel was passed in at auction yesterday on a vendor's bid of $2 million.

The auction was held in the top storey of the pub by auctioneers Power Jeffrey and Co under instructions from receivers Justin Walsh and Adams Nikitins.

About 70 people, a mix of locals and buyers, attended.

Bidding started at $1 million and slowly worked its way up to $1.425 million as two prospective buyers battled it out.

With the auction stalling, auctioneer Peter Power exercised his right to a vendor's bid of $2 million and the property was passed in.

The massive two-storey Queenslander style hotel was built in 2008 as part of a $35 million Plantation development which included 36 luxury units and nine shops.

At the time no expense was spared on the hotel.

It boasted an assortment of designer bars, a kids' play area and two ultra-modern kitchens.

American Oak timber was used in the doors and windows, spotted gum timber for decking on the ground floor and blackbutt for the upstairs flooring.