More than 60,000 people quarantined at Howard Springs during the height of the pandemic. But the Defence Department is now considering using the facility to house thousands of military personnel during training exercises.

The Defence Department has now confirmed it is in negotiations with the Northern Territory government about leasing the facility.

"Potential future use options for the site have been canvassed during routine discussions between Defence and the Northern Territory Government," a defence spokesperson said.

Hospitality NT, which represents many of Darwin's hotels, said demand during the dry season is so strong that hotel rooms will be filled by tourists even if military personnel are housed at Howard Springs. "During the dry season, any large surge in military or government can absolutely impact other tourists," the organisation's CEO Alex Bruce said.