Around 200 asylum seekers are currently being housed in the Britannia Hotel in Wolverhampton city centre as part of the Home Office’s dispersal programme.
Wolverhampton Council leader Ian Brookfield said some asylum seekers had arrived at the hotel in a “terrible state”.
He questioned whether they were getting the right support.
The hotel chain has been ranked as the UK's worst hotel chain for eight years in a row, receiving one star out of five for cleanliness, with the Wolverhampton branch the subject of hundreds of poor reviews.
Wolverhampton Council was told several weeks ago that Serco, which runs the Home Office contract for the dispersal scheme, was going to house asylum seekers at the hotel on Lichfield Street.
Mr Brookfield said after a short injunction the move went ahead despite the opposition of the council, which raised concerns over safety and welfare.
He said: “This is a hidden issue and it is not just impacting Wolverhampton, it’s Birmingham, Walsall, Dudley and Coventry.
“It is happening on a huge scale and it proves that the scheme is broken. We are bearing the brunt – we don’t know where these people are from or what help they need.”
Many of the asylum seekers are said to have arrived in the city with just the clothes on their backs, and outside the hotel young men congregate as washing hangs out of windows.
It comes as pressure mounts on the Home Office to find accommodation to deal with the high number of migrants crossing the English Channel.
Mr Brookfield branded the dispersal programme “unfair” and said the West Midlands Combined Authority area was getting “more than our fair share of asylum seekers”.
“There are plenty of other local authorities who are not even getting one asylum seeker,” he said. “We don’t know where these people are from, what help they need.
“Some of them have arrived here in a terrible state, there’s people with no clothes, no nappies for the kids. We know Serco are running this but they could at least put a little bit of humanity into it. As a council we are left out of the whole process.
"The Home Office needs to work with local authorities so we can help these people.”
The Britannia has been used to house asylum seekers in the past, including in 2015 when Wolverhampton Council threatened the business with an injunction for changing its use from a hotel to hostel. On that occasion G4S had used the building to put up asylum seekers from Syria, Sudan and Eritrea.
Earlier this year council leaders across the West Midlands urged the Home Office to stop using the region as a “dumping ground” for asylum seekers.
Councillor Mike Bird, leader of Walsall Council, said the region had spoken with ministers over the issue but added: “Unfortunately, the Home Office is not listening.”
He added: “The seven West Midlands councils are united in the view that everybody needs to play their part in dealing with this crisis.
“The people who are being brought here need to have suitable accommodation and they need to be properly looked after. That is not happening and enough is enough.
“Only one third of local authorities are taking refugees and it is not right. The Government needs to listen. It is time that the rest of the country stepped up to the plate.”
The Express & Star has been told a hotel in Walsall had also been lined up for asylum seekers but was rejected by the Home Office, while a hotel in Birmingham is currently under consideration for more than 300 migrants.
Other Britannia hotels have been put forward for asylum seekers. The Metropole in Blackpool, which is run by the firm, had been due to take in hundreds of asylum seekers on Friday, but the plan was put on hold following an outcry.
The dispersal scheme is different from the relocation schemes for Afghan refugees, which councils are actively engaging in.
Serco said a huge increase in the number of people arriving in the UK meant hotels were being used as temporary accommodation.
Asylum seekers housed by Serco are provided with meals and receive a small weekly allowance.
Jenni Halliday, Serco’s contract director for asylum accommodation services, said: “With the significant increases in the number of people arriving in the UK we have been faced with no alternative but to temporarily accommodate some asylum seekers in hotels.
“These hotels are only used as a last resort but as a provider of accommodation services on behalf of the Home Office we have a responsibility to find accommodation for the asylum seekers that are being placed in our care.
“The Serco team is working extremely hard to move people into dispersed social housing as rapidly as possible.”
A Home Office spokesman said: “Asylum seekers who would otherwise be destitute are provided with free, fully furnished accommodation and served three meals a day as well as all other essentials while applications are considered.
“Due to the unprecedented demand, we have had to use temporary accommodation such as hotels to manage demands on the asylum estate.
“The Home Office and accommodation provider Serco continue to engage and work closely with Wolverhampton Council on this issue.”