The 23-year-old has been linked with moves to Real Madrid and Bayern Munich in recent weeks following an impressive season in the Premier League.
Hoddle told the Daily Star: "I seriously believe that Gareth should stay at Spurs.
"It would be right for him and the club. The manager has a super squad and if Gareth settles his future and pledges to stay, AVB can then go out and buy the type of player who can add quality to the squad.
"If he can do that I have no reservations in believing that Tottenham can and will challenge the likes of Manchester United, City and Chelsea to win the league."
Tottenham face Manchester City in the Premier League later today.