Article published on the 2008-04-25 Latest update 2008-04-25 15:37 TU
This is the region's first violent attack since the new government took power in March.
Witnesses say that a man in a Suzuki car parked his car outside the hotel, before entering to order a cup of tea and then disappearing.
The blast comes despite efforts by Prime Minister Yousouf Raza Gilani's government to initiate dialogue with Taliban members and sympathisers - a breach with President Pervez Musharraf's reliance on military repression.
Pakistani Taliban commander Baitullah Mehsud, who's based in tribal areas near North-West Frontier Province, declared a unilateral ceasefire on Thursday, while government officials announced they had made a draft peace agreement with the armed militias. Key points included a ceasefire, troop withdrawal in certain areas and a prisoner exchange.