The number of rooms in “limited service” hotels in the city, such as the Easyhotel on Princes Street, has rocketed from 890 to 2700 in the past seven years, while traditional hotels have seen much more modest growth.
The report said in the peak summer period Edinburgh now had a total of around 27,000 rooms available for tourists – an increase of almost 6500 since 2005.
And it forecast that the Capital could need up to 9000 more by 2021.
But the audit of tourist accommodation in the city, commissioned by the Edinburgh Tourism Action Group (ETAG), said: “It is suggested that the recent dash for budget hotel development across the city should slow to ensure the city’s future portfolio of bed spaces does not become unbalanced and jeopardise the viability of fully serviced products.”
Sandy Steven, one of the authors of the report, said limited-service hotels attracted customers both from more upmarket establishments and from B&Bs and guest houses.
He said: “This type of accommodation has not been prevalent in Edinburgh until recently.”
People who would previously have stayed in B&Bs are now able to opt for a branded budget hotel where they know what they will get and how much they will pay. But it means B&Bs and guest houses risk losing out.
Mr Steven said: “We are not suggesting this is a sector that should not grow in tandem with other sectors.
“But if that level of growth continued into the future you would lose what is accepted at the moment to be a good mix and balance of accommodation in the city.”
David Hinnricks, of the Edinburgh Guest House Association, said there was no doubt the growing number of budget hotels had taken business away from B&Bs and guest houses.
“I think every B&B and guest house owner would agree with what this report is saying,” he said. You can see that from the number of guest houses that have been sold.
“It was fine when the budget hotels were out of town and for commercial travellers, but slowly they have crept into the city centre.”
And he said the prices charged were often far from “budget”.
“They have signs saying things like ‘Rooms for £19’ but I don’t know anyone who has had a room for £19. If you go and try to get a room for tonight, you might have to pay up to £150. The trouble is people think they are getting a bargain all the time.”
Deputy council leader Steve Cardownie said: “We do have budget hotels throughout the city now and they are very successful and well-patronised and fill a gap, especially at a time of recession.
“But we are aware there is room for more upmarket hotels and we understand there are a number of these kind of operators looking at Edinburgh.
“They will have done their research and this is an issue that will be addressed by the market, but if we as a city council can play a part we will do so.”