Dee Williams, deputy manager of the Grand Atlantic Hotel, which lies 200 yards from the pier, described the fire as "an inferno" and heard loud bangs which she believed to be fireworks left over from a recent display.
"It is part of our identity and would really affect trade if we were to lose it," she said.
Jacquie Whelan, owner of Sunfold Hotel on Beach Road, said it was a "horrendous" sight, with massive red flames, hundreds of feet in the air, all over the pier.
"[It looked] like a huge bonfire," she said.
Police have placed a cordon around the pier and beach and advised people to avoid the area.
The quarter-of-a-mile-long pier, which attracts thousands of visitors a year, reopened in April after a massive revamp.
It first opened in 1904 and was later bought by the Brenner family who sold it earlier this year in a multi-million pound deal to brother and sister Michelle and Kerry Michael.
Mr Michael is said to be on his way home from holiday in Spain.
"He had only just got there but has cut it short to come back," said his spokesman Nigel Heath.
"He is absolutely devastated. Mr Michael bought the pier in February and spent around £1m - he's installed a go-kart track, a climbing wall and fitted a bar for the first time.
"His whole plan was to turn it into a premier tourist attraction, in fact he already had.
"He had a huge personal involvement in the project and was totally committed to it."
Avon Fire and Rescue Service said the fire was well-developed by the time crews arrived and officers had to battle against "intense radiated heat".
Chief fire officer Kevin Pearson said: "Indications are that there were some deep fat fryers in the area where we believe the fire first started.
"We're fairly clear about where we think the fire first started and obviously our investigations will concentrate on that area."
The foundations of the structure, which is supported by iron girders, were said to be sound and not at risk of collapse.
Rod Brenner, who owned the pier until six months ago when he sold it to the current owners, said: "I think that what has happened is, fortunately it had a very thick hardwood floor, and I think that has held, from what I can see here.
"The entire pavilion has gone admittedly, and it'll be obviously a huge project to rebuild it, which will take a considerable amount of time.
"I mean, when it burnt down last time, in 1930, it took three years and they probably moved a bit quicker then than we do nowadays."
Christopher Donkin, manager of Seaquarium aquarium in Marine Parade, some 500 yards from the pier, was alerted to the fire by a colleague as he drove to work. He said: "Fortunately, we're not in danger, no other properties are in any other danger.
"The fire brigade have put a wall of water along the walkway between the seafront and the end of the pier.
"Traffic this morning was absolutely chock-a-block.
"When I first saw the fire, to be honest my first thoughts were for the livelihoods of people who work here.
"It's Weston's number one attraction. It's full of childhood memories.
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.