1980s office block overlooking Edinburgh square to be turned into city’s 15th Premier Inn hotel

Leisure and hospitality giant Whitbread has been granted planning permission for the conversion of Capital House on Festival Square, off Lothian Road, into a 195-bedroom budget hotel. The company said it would now invest some £21 million in the conversion and rear extension of the vacant office building into its latest format Premier Inn hotel with a ground floor restaurant and bar. It will sit adjacent to the existing upmarket Sheraton hotel on the square.

The new hotel, which will add to 14 Premier Inns already up and running in the Edinburgh area, is anticipated to generate an additional £8m-plus per year in visitor expenditure through the external spending of more than 56,000 business and leisure guests which are predicted to stay at the hotel every year once it reaches maturity.

Whitbread acquired Capital House freehold in late 2024 and submitted a planning application to change the use of the office block to a hotel in May of this year. In addition to its investment in Capital House, the group is working to expand the presence of Premier Inn at Edinburgh Airport and add a fourth Hub by Premier Inn hotel to the east of the city centre.

Jill Anderson, acquisitions manager for Scotland at Whitbread, said: “We are fortunate to have an established network of 14 trading Premier Inn hotels in Edinburgh which welcome a million visitors a year and drive £32m in annual external spending in the city.

“The strong year-round demand we are continuing to experience for our rooms in the city is driving the expansion of Premier Inn across Edinburgh, including at Capital House in the heart of the city centre.

“It is a sensational location for a budget hotel given its proximity to iconic tourist destinations like Edinburgh Castle, a host of theatres and concert venues, the Edinburgh International Conference Centre (EICC) and the Exchange District.

“Getting the green light to convert the 1980s office into a latest format Premier Inn is a huge achievement for the team and we will waste no time in breathing fresh life into the empty building and adding another high-quality location for our customers in Scotland,” she added.

In June, Whitbread submitted plans to transform another 1980s office building, on the edge of Edinburgh’s New Town, into a smaller, 102-bedroom hotel.

The move could see Premier Inn open another capital hotel, on the corner of Albany Street and Broughton Street, a short distance from the £1 billion St James Quarter.

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Regeneration specialist Artisan Real Estate said it had submitted a planning application to the City of Edinburgh Council to revamp the office building following the current occupier’s relocation. The firm said in June that it had agreed terms with Whitbread to operate the completed hotel under its Hub by Premier Inn brand.

The proposals would retain much of the external structure of the building while replacing the top floor facade with a “contemporary new cladding and finish” to meet current building standards. The five-storey building was constructed in the 1980s and was designed to reflect the adjacent Georgian neoclassical town houses along Albany Street.

Anderson added: “The Hub by Premier Inn brand is designed to appeal to budget, short-stay travellers. Albany House is an excellent location for us, and I am very pleased to be working with Artisan to expand our footprint in the city in a sustainable way.”

Last month, it emerged that Edinburgh’s growing reputation as a global tourism hotspot had seen it take nearly three-quarters of the investment made in Scottish hotels this year.

Commercial property consultancy Knight Frank’s analysis of Real Capital Analytics data found that of the £305m of investment deals involving hotels in Scotland between January and September, some £227m centred on the capital - 74.4 per cent of the national total.

Among the key transactions in Edinburgh during 2025 has been the sale of the distinctive W hotel, dubbed the “walnut whip”, which was acquired by Schroders Capital, marking one of the largest sales of recent years. The Bruntsfield Hotel was purchased by Dubai-based investor Dutco Group earlier in the year.

Hotels were the top-performing property sector in the city, ahead of offices (£212m), retail (£121m), and industrials (£28m), according to Knight Frank. It is only the second time this has happened in the first nine months of any year since the pandemic, adding to the £246m during the same period of 2024.

Official figures show that Edinburgh attracted more than five million international and domestic visitors last year. As a result, many hotels have seen occupancy rates hit new highs.

The firm’s research came as a separate report showed that Edinburgh had remained the most attractive UK city outside of London for hotel investment for a fifth consecutive year.

Deloitte’s hotel industry and investment survey saw the Scottish capital ranked most attractive by more than half (54 per cent) of respondents, followed by Cambridge, up two places from last year. Oxford and Manchester took third and fourth places respectively.

Leila Jiwnani, head of hospitality advisory at Deloitte UK, said: “Edinburgh continues to demonstrate its popularity as a tourism hotspot, while destinations across Europe see varying levels of interest. Investors will be looking for locations that attract a variety of visitors, particularly amidst changing consumer preferences, including a focus on either value or luxury.”