Tory Leader Jamie Baillie said the loan for the Rodd Grand Hotel and Convention Centre wouldn't be necessary if the government had a better tourism strategy in place for southwestern Nova Scotia.
He said more than 2,000 jobs have been lost in the region since the government stopped subsidizing a ferry service between Yarmouth and Maine three years ago.
"It shows what is so wrong about the way the NDP go about job creation," Baillie said in an interview.
"Support for the Yarmouth ferry was really support for the entire tourism and hotel industry. But by cancelling the ferry, now the NDP are picking winners and losers. And that's wrong."
Liberal Opposition Leader Stephen McNeil said spending the money on the hotel and not other businesses in the area "defies logic."
"The government should be investing in public infrastructure that every small business can capitalize on," said McNeil, whose Liberals hold the seat in Yarmouth.
The government said the loan will protect about 75 jobs and ensure the hotel is ready to host visitors for the World Junior A Hockey Challenge in November.
A government spokesman said the hotel must maintain a minimum of 50 jobs under the terms of the loan.
Tourism Minister Percy Paris dismissed the opposition's criticism, arguing the hotel loan is exactly the type of boost the region needs.
"I make no apologies for investing in Nova Scotians," he said.
The province is spending $150,000 on the seven-day hockey tournament, which was also held in the seaside town last year.
"The Rodd is a very, very vital and strategic part of that hockey investment," said Paris.
"This investment enables the good people in southwest Nova Scotia to attract other events. You can't have one without the other."
The 138-room hotel also received $1 million in government funding in December 2011 to upgrade the facility and protect 50 jobs. It is one of two Rodd used to operate in Yarmouth.
The Rodd Colony Inn shut its doors in 2011 — one of a number of businesses to close shop in Yarmouth after the high-speed ferry service stopped running.
The ferry's former operator, Bay Ferries Ltd., announced in December 2009 that it would cancel the money-losing service after the government said it could no longer provide an annual, $6-million subsidy.
The opposition parties said the Rodd Grand Hotel, like other businesses, is struggling because the absence of a ferry has meant fewer tourists to the region.
"I don't begrudge Rodd. They are in a moment of desperate need because the underlying supports aren't there," said Baillie.
"Until we have a government that gets a ferry back in operation and supports the whole industry, these things are going to happen."
Premier Darrell Dexter announced last year the government will provide up to $21 million over seven years for a new ferry service if a sound business case can be made for such an operation.
A committee with government and private sector representatives is evaluating proposals from two prospective operators.
Kevin Lacey, Atlantic Canadian director of the Canadian Taxpayers Federation, said his group supported the government's decision to stop subsidizing the ferry.
He said there's no guarantee reviving the service will fix the region's problems.
"A lot of the issues in southwest Nova Scotia in regards to tourism don't have anything to do with the government. It's outside of our control, like the dollar or the price of gas," he said.
"Either we're creating a diverse economy that can support people within the region or we're going to continue to use taxpayer money to try to prop up failed businesses. They can't have it both ways."