Speaking during a visit to the site of his new Virgin Hotel in Edinburgh’s Old Town, he said there was a “serious danger” it could deter potential visitors if it introduced such a scheme in isolation.

Sir Richard, who hosted a party for industry leaders to herald the start of work on what will become the first Virgin Hotel in Europe when it opens in 2020, insisted the development would respect the heritage of the site. He said he had selected Edinburgh for his new brand because the city had a “big gap in the market” for high-end five-star hotels.

Sir Richard revealed ambitions to expand the brand to Glasgow, where his wife Joan was brought up, if he finds the right site.

Sir Richard Branson says he picked Edinburgh because there was a gap in the market for high-end hotels. Picture: Getty Images

The businessman said he would only endorse the idea of a tourist tax if it was introduced across the UK but also raised concerns about the possibility of income raised from the new tax “disappearing” if it was not made clear how it was to be re-invested in the tourism industry.

Sir Richard also said his “five-star” venture at India Building, on Victoria Street, would be an antidote to hotels run by chains like Hilton and insisted it would fill a “gap” at the high end of the hotel market in the Scottish capital. He revealed that up to 300 jobs will be created in the 225-room hotel, which will contain at least four bars and restaurants.

Just one Virgin Hotel is operational at the moment, in Chicago, although work is underway on others in San Francisco, Nashville, Dallas and New York, while others are planned in New Orleans, Silicon Valley and Palm Springs.

Sir Richard entered Edinburgh’s increasingly heated tourist tax debate days after a new poll found three-quarters of small businesses in the city were opposed to the idea.

Asked about the prospects of Edinburgh becoming the first destination in the UK to ask visitors to pay an additional levy, Sir Richard said: “There is a problem with any tax where an individual city is singled out. The government would have to watch it very carefully.

“There is a danger that if it is done in one city [Edinburgh] you could have everyone going to Glasgow. If you’re going to do it, it would be better if it was done nationwide.

“It would also have to genuinely support the tourism industry and not just disappear into a general pot.”

Asked about the possibility of other Virgin Hotels in Scotland, Sir Richard said: “I can definitely envisage us opening in Glasgow if we can find the right building. Our team are definitely out there looking. If we can find one I know I would be forever popular with my wife.”

Sir Richard was visiting Edinburgh just days after a long-running heritage watchdog urged the city council to introduce an “immediate moratorium” on new hotels in the Old Town over concerns that they are putting its historic character and vitality “seriously at risk.” Earlier this year an official report warned that parts of the Old and New Towns were struggling to cope with the huge influx of visitors during peak periods.

However Sir Richard said: “I don’t think a city can have too many tourists. It can be slightly overwhelming if you have floods of people coming off cruise ships.

“From what I can tell, the amount of tourists Edinburgh gets is manageable.

“I’m not sure you have the hotels in Edinburgh to attract the really upmarket tourists that can spend decent money. That’s where Virgin Hotels can fill a niche in the market.

“We like to go to where we feel there is a need for one. There are a lot of hotels in Edinburgh, but there is a big gap in the market for quality five-star hotels at the highest end.

“Scotland does have some five-star hotels, particularly outside the cities, but inside the city they are slightly lacking the kind of hotel that I think we can bring to this beautiful city.

“The last thing we want to be like is a Hilton or another big chain hotel. Every single Virgin Hotel will be unique.

“This will be run like a family-run hotel. It will be a fun place - it’s not going to be a snooty hotel like you would get on a golf course.”

Richard Branson: Edinburgh tourist tax could drive visitors to Glasgow