One of Edinburgh's most iconic landmarks is to be turned into a hotel, it emerged yesterday.

The Old Royal High School, which was originally considered as a possible site for the Scottish Parliament, will be transformed into a ultra-luxury five-star hotel.

Developers Duddingston House Properties (DHP) hope to lure the world's wealthiest clientele by offering unparalleled views of Arthur's Seat and the city.

The building, which dates back to the 19th century, would form the hotel's main entrance, with a new modern extension built at its rear.

It is hoped the project will launch the derelict building into the upper leagues of European hotels with room prices never before seen in the Scottish tourist market.

Similar hotels in other European capitals, such as the Four Seasons Hotel George V in Paris, command nightly rates in excess of £800 for a standard room and more than £2,700 for top suites.

Three global upmarket brands, none of which currently have a Scottish location, have been shortlisted to manage the venture once it is completed.

And developers claim the completed project will create 640 jobs when it opens, adding £27 million to Edinburgh's economy every year.

So far, £55 million of private funding has been pledged by investors, which is helping to ensure the viability of the project.

The A-listed building will remain council property but will be handed to the developers on a 125-year conditional lease following a competition in 2010 won by DHP.

Its redevelopment will also give members of the public access to the old school building, designed by Thomas Hamilton, for the first time in its 190-year history.

The project is being pushed by DHP chief executive Bruce Hare, architect Gareth Hoskins, and hotelier David Orr of the Urbanist group, the firm which brought Harvey Nichols to Edinburgh.

Mr Orr believes the hotel could have a similar impact on the city's economy and set Edinburgh up as a destination for "international diplomatic events" and conferences.

He said: "What we are proposing to do is to add something truly special to the Edinburgh hotel market by bringing one of the best hotel operators in the world to the city.

"This will not in any way diminish current hotel provision, indeed it will add another tier at the top, which can only benefit all of the city's operators.

"By increasing the breadth of hotel offering, Scotland's capital will be in a position to attract new visitors from the top end of the market as well as improve its ability to compete with other European cities for international diplomatic events and important global conferences.

"But importantly, one of Edinburgh's architectural jewels in the crown will be sensitively restored and the public will have access to Hamilton's superb building for the first time."

Edinburgh-based tourism consultant, Kenney Wardrop, said the plans would fill the gap at the top of the city's hotel market.

He said: "The city doesn't have the high-end hotels that it should have for the kind of destination that it is, therefore it's missing out on key markets and key distribution channels because it doesn't have those hotels.

"It gets you into a market that is under-served in the city.

"With new international air routes like American Airlines, Etihad and Qatar Airways, they have links into these kinds of hotel chains like Movenpick, Intercontinental and Four Seasons that their passengers expect to find at destinations they fly to."

The application for outline planning consent will be submitted to the council next month, with a three-day public exhibition being held at the Royal High School in February.

A spokesman for Edinburgh City Council said: "The Old Royal High School building has not had a continuous use since the school moved 46 years ago.

"We look forward to the pre-application process in January for this important project by the developers who won the council's competition."