Military explosives specialists arrived at the Ebrington Square accommodation shortly after 15:20 GMT following reports of a suspicious parcel.
The operatives conducted a controlled detonation of the device before removing it for forensic analysis.
A Halloween-themed funfair was operating in the immediate vicinity when the security alert was triggered.
Despite the incident, the hotel remained open to guests throughout the operation.
Police have described the event as a reckless and targeted attack on the hospitality venue.
The package was discovered by staff during their routine checks of the premises.
No injuries were reported as a result of the explosion or the initial discovery.
The device has since been secured for detailed examination by investigators.
Local authorities are coordinating with security services to ensure public safety remains assured.
The funfair continued its activities at a short distance from the hotel site.
This marks another instance where military expertise was deployed to neutralise a potential threat in the city centre.