A man has been arrested on suspicion of arson with intent to endanger life following an "unexplained fire" at Ty Belgrave House hotel in Aberystwyth on Wednesday.
A man remains unaccounted for following the blaze, with police still working to trace his next of kin.
Fire crews had rescued nine adults and three children from the nine-bedroom guest house after being called at 2.21am.
DCI Neil Jenkins of Dyfed Powys police said: "We are continuing to investigate the circumstances surrounding the unexplained fire which broke out at Belgrave House, Aberystwyth, during the early hours of Wednesday morning.
"As a result of our enquiries, a man has been arrested on suspicion of arson with intent to endanger life and is currently in police custody in Aberystwyth.
"One man remains unaccounted for following the fire. Work is being carried out to trace his next of kin, and officers are liaising with the Lithuanian Embassy in an attempt to contact them.
"The cause of the fire is yet to be determined, and work is being carried out to make the building safe while preserving evidence at the scene. It is anticipated that access will not be possible until the end of this week at the earliest. Police and fire officers will then carry out a joint investigation to establish the cause of the fire."
Officers have asked anyone who was in the vicinity of the hotel between midnight and 3am on Wednesday 25 July to call 101, or Crimestoppers on 0800 555 111.