Forty guests, including children, were trapped as fire engulfed one of Parow's oldest buildings, the landmark Central Hotel, early on Monday.
They were surrounded by flames on the first floor of the old hotel after the wooden floors of rooms and passages started burning.
The fire, believed to have been caused by an electrical short-circuit, broke out at about 1am.
Charmaine Norman, one of several guests who jumped from a first-floor balcony to escape the flames, broke her ankle when she hit the tarmac below.
Aletta du Toit passed her one-month-old baby through her room window to a policewoman who had clambered up the side of the building.
Then she and her husband Lukas leapt to safety.
When police reached the scene shortly after the fire broke out, they heard guests inside screaming for help and gas bottles exploding at the back of the building.
Johannes du Toit, Aletta's brother, said that when he woke up the hotel had been burning fiercely.
"The 16 rooms are all in the older part of the hotel at the front, where the first floor is wood," he said.
"When I opened my door, the passage was just flames. Through the window and on to the balcony was the only way out.
"The fire spread so quickly, there was no time to collect our belongings.
"Most of us have only our pyjamas, nothing else," Du Toit said.
Fire tenders, including a hydraulic platform from Goodwood, carried Elsies River and Bellville fire brigade personnel to the scene, but the building, which had changed hands recently, could not be saved.
Traffic officers closed off a section of Voortrekker Road until the fire brigade extinguished the fire.
Du Toit said it was a miracle that no one had died in the blaze.
"A few guest were treated for smoke inhalation," he said.
The fire destroyed lounges, a bar containing slot machines, the kitchen, offices and storerooms downstairs.
A bottlestore in the building was also gutted.
Fire investigators from the police and fire brigade are expected to sift through the debris later on Monday for clues to establish the exact cause of the blaze.