The property would have to meet current standards for setback, parking, and traffic (only entrance is on Harbor). The large cost of designing a project and getting city approval (think Eastern Gateway), to end up with a small Hotel or restaurant doesn't make sense at today's land values.
So, you have 5 property owners that could do something with it, all with adjacent properties, Castle Inn, Kings Inn, Ramada Plaza, Hotel Indigo or America's Best Value. Or the hope of the Anaheim Hotel owners, Wincome to buy both the Castle and the empty property as part of it's 4 star project for the Anaheim Hotel. But they are shifting money around to get the Westin open right now, so until that property starts to make money for cash flow reasons, they are not looking for new properties. (Wincome has been offered purchase opportunities lately, including the Crowne Plaza, and stated they had no interest in purchasing). There is a rumor Wincome might be a serious player for AGW though. They need the November election to go their way, so they are stalling.
http://www.anaheimblog.net/2016/10/19/11519/
The politics are starting, the General Manager of the Desert Palms (non-Union) addressed the city council last night during public comments talking about many of its employees who moved up the ranks (himself included) to get high level jobs and are local residents.
Of course, and Unite HERE union member had to give a snarky comment later in public comments (Martin Lopez).