All the larger seaside resorts had the same problem once people started going on foreign package holidays. The numbers of people staying in the boarding houses fell off a cliff and councils/authorities started busing unemployed, alcoholics, addicts, newly released offenders (and now illegal immigrants) into the empty boarding houses turning them into bed sits. But the authorities didn't put in adequate support and policing, so crime, anti social behaviour etc increased causing a vicious circle as more people stopped going to stay in those places on holiday causing more empty boarding houses, which in turn became used for "problem" families etc.
I lived in a smaller seaside resort relatively close to Blackpool where the rot set in during the 80s, continued into 90s, and never been reversed really. Whole swathes of my old town became run down, semi derelict and pretty unwelcoming and dangerous very quickly indeed.
I've often said that entire blocks of old boarding houses need to be demolished en masses and decent sized family homes built instead. We've had several "modernisation" initiatives in some of the worst areas, but the newly renovated bed sits are just ruined by the next wave of "problem" tenants bused in, so the streets are OK for a short time, but within a few years are semi-derelict again.
Trouble is that the unemployed, addicts, newly released prisoners and immigrants have to be housed "somewhere" and it's just the easy option for the authorities to use empty/run down bed sits/guest houses for them. Of course the landlords and owners love the idea of the rental income which they bank for a while but don't save to use to renovate/improve once they've been trashed, so just wait for the next "initiative" of governmental money/grants to refurbish in years to come!
The real problem with Blackpool (and other large resorts) is that they;re now too big for the much smaller numbers of people. They're too spread out. That's why smaller places (such as Scarborough and Whitby) have weathered the storm a lot better as there's less of it, so the relatively smaller number of visitors are more concentrated in a smaller area, making the empty units (shops and homes) less obvious and less social deprivation impact. No one notices the one or two empty shops in Whitby centre, but you can't help but notice the dozens of empty shops/derelict guest houses in some streets of Blackpool!