ONE of Scotland's best known hotels is buying a renowned rival under a £10 million expansion plan it believes will provide a significant boost to the country's tourist industry.

Crieff Hydro has agreed to acquire the Peebles Hydro and the Park Hotel in the Borders town from McMillan Hotels in a deal that is expected to conclude in the coming weeks.

The privately-owned Crieff business plans to make big investments in the Peebles venues, where directors expect to roll out the profitable formula it has developed in Perthshire.

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The company is also taking on the management of three hotels in Scotland and one in England.

The moves will result in a fourfold increase in the number of hotels managed by Crieff Hydro, to eight from two.

They come as directors' plan for a £100m expansion of Crieff Hydro enters a crucial stage.

Perth and Kinross Council will this month consider Crieff Hydro's application to build 200 holiday lodges, a 200-bed care home and assisted living centre and new leisure and retail facilities on the site.

The company appears to be making a bold move at a time when Scotland is emerging from a long economic downturn, during which consumer spending came under pressure.

However, chief executive Stephen Leckie said Crieff Hydro had shown its ability to operate successfully in tough conditions.

The four star hotel boasted a 82% occupancy rate for its 215 bedrooms last year while its 55 self catering units were 85% full.

Mr Leckie said the deal had been agreed following long discussions, which were initiated by agents acting for McMillan Hotels.

The 132-bedroom Peebles Hydro serves a similar market to Crieff Hydro, winning 70% of its business from leisure customers and 30% from commercial clients.

While Mr Leckie thinks the Ryder Cup will boost tourism in Scotland this year the timing of the golf tournament was not a factor in the acquisition.

The enlarged business should be able to generate synergies in areas like marketing and purchasing.

Mr Leckie said Crieff Hyrdo expected to invest "north of" £10m buying and upgrading the two hotels.

He said: "Our approach will be to develop and enhance the existing facilities in these hotels and build on their individuality and personality."

Crieff Hydro has invested £40m upgrading its facilities during Mr Leckie's 20 years in charge.

The company said there would be no redundancies at the four star Peebles Hydro.

Asked if there might be lay offs at the 24-bedroom Park Hotel, Mr Leckie emphasised he wanted to grow the business. He said: "Why would we buy a place and start making people redundant?"

Crieff Hydro, which also runs the 21-bedroom Murraypark hotel in the Perthshire town, has secured bank funding from Santander for the acquisition and development of Peebles Hydro. It has moved its business to the Spanish lender from Bank of Scotland.

The company will run The Isles of Glencoe Hotel & Leisure Centre, The Ballachulish Hotel, the Oban Caledonian and The Yorkshire Hotel in Harrogate as a joint venture with their owner Colin Johnston.

Mr Johnston noted: "Having been through the hands of a few operators, it will take time for these businesses to stabilise but I know they have great potential."

Mr Leckie said Crieff Hydro had spent the last three years beefing up its staffing to support a big expansion.

The appointment of managing director John Jennett in 2011 freed Mr Leckie to focus on growth. Mr Jennett previously ran the Freedom of the Glens business, which used to run the three west coast hotels Crieff Hydro will manage.

Privately-owned McMillan Hotels acquired the two Peebles hotels in 1994.

Managing director Douglas McMillan said the Stranraer-based firm is refocusing and reinvesting in its properties in the south west of Scotland.

Crieff Hydro's hotels have around 630 employees, while the two Peebles hotels have around 140.