Roddy Smith, chief executive of Essential Edinburgh – which represents 600 hotels, bars, restaurants and retailers – said the city could not afford to “dilute the impact” of one of its biggest and most successful events.
He insisted that heritage and community groups, who have led criticism of an expansion of the market, “do not speak collectively for the whole resident and business population of our city."
He urged them to “embrace and support” tourism and events rather than see them as “things the city needs to fight against.”
Mr Smith intervened days after Edinburgh World Heritage chiefs called for the Christmas market to be scaled back due to its impact on views across East Princes Street Gardens.
Other critics of the market since work began in the gardens last month have included the Old and New Town community councils, the Cockburn Association heritage watchdog and several city centre councillors.
A record 163 different stalls and bars will be spread across East Princes Street Gardens and The Mound precinct under a revamp designed to accommodate changes in the park since a major landscaping project was carried out as part of a £22 million project to improve access to the Scottish National Gallery.
Mr Smith is also a trustee of The Quaich Project, the public-private partnership set up to pursue a £25 million overhaul of West Princes Street Gardens.
Concerns have been raised that the project will lead to the increasing "commercialisation" of the 19th century park, which is home to a series of pop and rock concerts each summer, the fireworks finale to the Edinburgh International Festival, and a Hogmanay concert.
Mr Smith said there was a “pressing need for a coherent strategy for the use of public space” for the city's major festivals and events.
However he added: “These are major drivers of the city’s economy. We need urgently to look at how we ensure we maintain and support events that are the envy of cities around the world.
“The highly-publicised comments of recent weeks have again seen heritage and other resident interest groups in the city raise concerns over what they perceive as the over-commercialisation of our public space.
"There is no doubt that some issues of process should have been handled better and I am sure that there will be reviews of how the situation escalated.
“However, let’s be in no doubt. The interest groups, community councils and some councillors have all jumped on the bandwagon to support their own agendas about how we use our public spaces.
"They speak very well and articulately for their own groups and members, but do not speak collectively for the city’s resident and business population."
Culture chiefs on the council announced a "root and branch review" of the city's winter festivals in the summer, when it emerged that events company Underbelly had been awarded a two-year extension on its existing contract, meaning it will be in charge of events in the gardens until at least 2021-22.
However the council has ordered an inquiry into the handling of the expansion of the market this year and a failure to secure planning permission for a huge structure which has been erected on top of the gardens.
Research published last year by Underbelly said the Christmas festival was worth an estimated £113 million to the city's economy. More than 771,000 tickets were sold for the 2018-19 event, 186,799 of them from people in Edinburgh.
Mr Smith added: "The vast majority of these people, irrespective of whether they are visitors or residents, also go on to shop, eat, drink or stay overnight, as well as visiting specific attractions.
"This helps sustain full time employment as well as a number of seasonal and part time jobs over the festive period.
"The citizens that work in retail and leisure roles may have concerns linked to the use of public space, but they are far more concerned about their jobs and income.
"The retail and leisure businesses in the city centre (that pay the highest business rates in the country) see this period as vital in their trading year.
"Heritage and community groups need to embrace this, accept there are wider concerns and that tourism and events support groups and citizens that sit squarely out with their core membership. Tourism and events are not things the city needs to fight against, they are things we need to embrace and support.
"Through our own management of the privately-owned St Andrew Square Garden, we're acutely aware of the debate over the use of green space in the city.
"However, we do need to come together to look at what appropriate public space is available, what space is best suited to host major events, and what more we can do to ensure our public space is put to good use to promote and protect the quality of life of our city and the very livelihood of many of our citizens."
Mr Smith said the city's tourism sector was expected to help the city withstand turbulence in the retail industry and highlighted the number of new hotels which are due to be opened in the near future by Gleneagles, Malmaison, Virgin and at the new St James development.
He said: "Where we are strong is our tourist and visitor numbers, which support our resident population, making Edinburgh such an attractive investment opportunity.
"There is also a strong relationship between this investment and the restoration of important heritage buildings in the city, a number of which would be lying empty if not for high quality interventions by some of the companies already mentioned.
"The city needs to stop arguing and squabbling over issues such as over tourism and the use of our public space and work together to find workable solutions for the long term."
A spokeswoman for Underbelly said: "As Roddy says, Edinburgh’s Christmas is a hugely popular festival which makes a significant contribution to Edinburgh’s economy, with independent research calculating its impact as £113.2 million.
"The opening of East Princes Street Gardens on Saturday proved once again how popular the event is, attracting 30 per cent more visitors than the same day last year.
"The commercial success of Edinburgh’s Christmas also underpins the free and community events throughout the city such as Sunday’s Light Night event.
“Underbelly has welcomed and will contribute to the council’s consultation on the winter festivals from 2022 onwards.
"Up to and including the 2021 festival, Underbelly has a contract with the City of Edinburgh Council to produce Edinburgh’s Christmas in East Princes Street Gardens and the new structure is designed and engineered to fulfil that, while protecting the gardens, improving the crowd-flow and making the event more accessible.”
City council Leader Adam McVey: said: "Like the August festivals, our Hogmanay and Christmas celebrations bring unique challenges and opportunities. They are highly popular cultural events. They bring welcome footfall and spend to our city centre.
"Yet, consideration needs to be given to the future shape of these events. A conversation with residents and businesses is key and it’s something we’re wholly committed to as part of a public consultation next year.
“We’re proactively working towards a new tourism strategy for Edinburgh, introducing a new council policy in the process which promotes sustainable tourism and putting our residents first.
“Edinburgh is at the forefront of change in Scotland, making our case to the Scottish Government to bring in the UK’s first transient visitor levy or ‘tourist tax’ – a move that will help us manage tourism better and further sustain our public services.
"This is alongside leading the way for new legislation to regulate short-term lets and focusing on enhancing skills and fair pay in the sector.
“All of this will support us as we address the challenges our successful tourism sector can have on our communities while nurturing the very real and important benefits it brings.
"Like employment for 35,000 people, an economic injection of over £1.5 billion each year and an enviable calendar of world-class events."