Known as Exchange 2, the development on the western side of the West Approach Road will include a four-star business hotel with up to 400 rooms and a catering academy and hotel training school intended to provide jobs and training for 200 young people.

Three separate new buildings are involved and part of the development will mean building on top of an existing electricity substation. The scheme would retain the B-listed façade of the three-storey Scottish Power office building in Dewar Place.

The go-ahead was delayed after concerns were voiced over the height of the buildings. But now changes have been made to the top storeys of two of the three proposed blocks and councillors have given the project their backing.

Catalyst Capital is funding the project, which is being proposed by a consortium including Duddingston House Properties, the developer behind plans to turn the old Royal High School into a luxury hotel, and designed by JM Architects.

The catering academy is to be run in conjunction with Queen Margaret University and the hotel training school with Edinburgh Napier University.

Julian Newiss, chairman of Catalyst Capital, said the development would enhance Edinburgh as one of the most successful and dynamic cities in Europe.

He said: “We’re obviously delighted that the proposals have been approved and are keen to press on with the development as quickly as possible.

“We firmly believe that this is a ‘game changer’ for the tourism industry in the city, and we look forward to creating a high-quality development that will be unique in Britain.

“Our aim is no less than to create a development that delivers jobs and prioritises recruitment and training of local residents. And we’re determined see those people being recruited into tourism careers, not just jobs.

“Tourism is the world’s biggest business and Edinburgh can continue to go from strength to strength with smart, high quality strategic investments like Exchange 2.”

The developers will be expected to pay around £2.5m towards the city’s tram network.

Work could start later this year with a completion due in 2020.