A MAJOR new hotel is set to go into direct competition with the Balmoral on Princes Street.
A new top-end hotel is set to be built as part of a massive refurbishment of the first building at the east end of Princes Street.
Under the 12 million plans, drawn up by one of Britain's biggest property investment companies, the new hotel would be built above the shops currently occupied by retailers including Burger King and Waterstone's.
The four ground-floor retail units, which also include two tenants on temporary leases, would also be revamped in a bid to attract big-name retailers.
Aberdeen Property Investors (API) – a subsidiary of global giant Aberdeen Asset Management, which manages 114 billion of assets on behalf of investors around the world – is behind the proposals.
The new hotel and retail scheme would link in with the proposed new St James Quarter development just around the corner.
City leaders have hailed the development as a major boost to its "string of pearls" masterplan drawn up to encourage the regeneration of Princes Street.
While no decisions have yet been made as to which hotel company would occupy the site, it is expected to be a four-star or five-star facility, putting it head-to-head with the Balmoral on the opposite side of the street.
One Edinburgh property source said: "It is right in the heart of everything that is going on in Edinburgh; it's a great site.
"It is opposite the Balmoral and would suit another top-end hotel."
It is understood that API has been in talks with the council's planning team for a year.
Each of the retailers on the ground floor is thought to be on a short-term lease that would allow development to move ahead quickly.
Full plans are expected to be lodged with the council within weeks.
Councillor Tom Buchanan, the city's economic development leader, said: "This latest development proposal is another step forward in our 'string of pearls' project, which aims to bring new life to the city centre.
"I am pleased to see that developer interest in Princes Street remains strong and I look forward to seeing detailed plans emerge for this block later in the month."
It will become the third new hotel to be built on Princes Street, with plans under way for a new Premier Inn at number 121-123 as part of developer Deramore's 40m scheme, which also includes New Look.
Sir Stelios Haji-Ioannou's easyGroup empire is also to build its first Edinburgh easyHotel at 125a Princes Street, which used to be home to the Edinburgh Rock Cafe but has been lying empty for more than a decade.
A spokesman for API was not willing to discuss details of its plans for 10-15 Princes Street, but he said: "We are still in discussions to get our (planning] submission into shape."