The family has applied for planning permission to convert the upper floors of the Northumberland Street pub - currently described as managers' accommodation - into 11 serviced apartments with double beds, kitchenettes and en-suite facilities.
The pub itself - a popular rock music venue in the town - would remain a pub and live music venue under the existing landlord.
The family said the project would help towards providing more high quality accommodation in Morecambe, especially given the proposals for Eden Project North nearby and the projected increase in visitors this would bring.
The family said: "The planning application does reference the Eden Project a lot but we are committed to the renovation regardless, having been looking for the right venue in Morecambe for a while.
"We know Morecambe is a special place to visit with so much natural beauty and that it is short on high-quality accommodation of this type.
"We are all locals and staunch supporters of local investment to help improve and support the local community and economy.
"The Bath is a fantastic building with a great heritage and we are excited to add our investment to an increasing number that is seeing Morecambe back on the rise."
They are hoping to have the accommodation open by the end of the year, subject to planning approval.
The development would include a first floor extension, with decking above, the installation of roof lights, and would "retain the charm of The Bath Hotel by restoring its art deco look to its’ former glory whilst making the most of the accommodation it offers, including the sea views unique to Morecambe."
The family are working alongside Steph Howard, from Heysham, who also holds The Bath Hotel in high regard.
The planning application states: "The proposal for serviced apartments is an exciting prospect for this site in the proximity of the proposed Eden development.
"It will provide much needed accommodation for visitors wishing to visit the site when open and retain their freedom to eat out rather than be restricted via hotel meal times.
"The proximity of the accommodation toward the Eden project within short walking distance to the train and bus station makes this an ideal location for this type of accommodation."
It is understood The Bath Hotel was built in the 1870s, and refurbished in an Art Deco style in the 1930s.
It closed briefly in 2016, but re-opened later the same year under new management.