About 70 people were evacuated in an emergency rescue after the storm created a basketball-sized hole into the wall of the Triangle Motor Inn, crumbling brickwork and causing the roof to fall down.
Guests were still in their rooms when the collapse began, and police and fire crews had to force their way into rooms to reach the residents.
They have been taken to shelters and none were injured.
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Another 150 people were trapped 30 miles away in New Bern, North Carolina, near the mouth of the Neuse River, after waters rose 10 foot (3m).
The city centre of New Bern, which has 30,000 people, is under water, according to authorities.
Amber Parker, a spokeswoman for Craven County Emergency Management told broadcaster MSNBC, said: «Some areas we can’t get to at all.”
A resident called Bree said on Twitter: «If anybody could help… our cars is under water and so is our house. Stuck in attic.”
Widespread flooding stuck North Carolina overnight, hours before the storm peaked.
The eye of the storm has since made landfall, hitting near Wrightsville Beach, North Carolina, just east of Wilmington, at about 12.30pm BST (7.30am EDT).
Katie Walls, Weathercaster for WSB-TV Atlanta said the hurricane had brought the most terrifying wind speeds for almost 70 years.
She tweeted: «Wind Gusts at Wilmington Intl Airport reached 92 mph, the highest wind gust since Hurricane Donna hit September 11, 1960.”
In its latest update at 10am BST (5am EDT), the National Hurricane Center (NHC) said the storm was packing winds of up to 90mph.
It said: “Hurricane-force winds extend outward up to 80 miles (130 km) from the centre and tropical-storm-force winds extend outward up to 195 miles (315 km). A NOAA observing site at Cape Lookout, North Carolina, recently reported a sustained wind of 72 mph (116 km/h) and a gust of 90 mph (145 km/h).
“The combination of a dangerous storm surge and the tide will cause normally dry areas near the coast to be flooded by rising waters moving inland from the shoreline.”
The NHC said water has the potential to reach:
- Cape Fear NC to Cape Lookout NC…7-11 ft, with locally higher amounts in the Neuse, Pamlico, Pungo, and Bay Rivers
- Cape Lookout NC to Ocracoke Inlet NC…6-9 ft
- South Santee River SC to Cape Fear NC…4-6 ft
- Ocracoke Inlet NC to Salvo NC…4-6 ft
- Salvo NC to Duck NC…2-4 ft
- Edisto Beach SC to South Santee River SC…2-4 ft
It added: “The deepest water will occur along the immediate coast in areas of onshore winds, where the surge will be accompanied by large and destructive waves. Surge-related flooding can vary greatly over short distances.
“Southeastern coastal North Carolina into far northeastern South Carolina will see an additional 20 to 25 inches, with isolated storm totals of 30 to 40 inches.
“This rainfall will produce catastrophic flash flooding and prolonged significant river flooding.
“The remainder of South Carolina and North Carolina into southwest Virginia will see 5 to 10 inches, with isolated 15 inches. This rainfall will produce life-threatening flash flooding.”
Despite the dire warnings, come residents ignored calls to evacuate.
Near the beach in Wilmington, a Waffle House restaurant, part of a chain with a reputation for staying open during disasters, had no plan to close even if power was lost, and there were lines to get in on Thursday evening.
Will Epperson, a 36-year-old golf course assistant superintendent, said he and his wife had planned to ride out the storm at their home in Hampstead, North Carolina, but then reconsidered. Instead, they drove 150 miles (240 km) inland to his mother’s house in Durham.
He said: «I’ve never been one to leave for a storm but this one kind of had me spooked.”