The Fitzpatrick Hotel Group has submitted a planning application to Edinburgh City Council for its first boutique hotel in the UK.

If approved, the £40m property is set to open by 2010 and will become the third hotel to be part of The Fitzpatrick Design Collection, joining the The Beacon and The Morgan hotels in Dublin.

The plans include refurbishing three adjoining Georgian townhouses into a 167-bedroom hotel on Baxter's Place, next to the Playhouse Theater in the east end of the city. The hotel will feature a 150-seat restaurant, cocktail bar and lounge as well as conference and business facilities.

Plans also include the restoration of the building's facade and a modern extension to the rear of the building and a glass penthouse for luxury suites with garden terraces.

Paul Fitzpatrick, founder of the Fitzpatrick company, said: "Edinburgh is a cosmopolitan city and one of the most desirable places in Europe to invest, visit, work and live.

"The site at Baxter's Place offers us exactly the opportunity we've been looking for which is an architecturally rich building in a gateway location, brimming with restaurants, bars and entertainment.

"Our plans are to create a designer chic contemporary hotel which would add a lively and attractive venue to the east end, complementing the plans for the redevelopment of the area."

The second-generation Irish hotel operator currently has five hotels in its portfolio, three in Dublin, including its design hotels and the traditional Fitzpartick Castle Hotel, and two in New York – the Fitzpatrick Grand Central and Fitzpatrick Manhattan.

Graham Birse, deputy chief executive, Edinburgh Chamber of Commerce, said:  “At a time of slowing investment in the housing and financial services sectors, it is absolutely vital that Edinburgh maintains its strength in leisure and conference tourism. The Baxter’s Place development is an innovative scheme, delivering a quality of design and of facilities in keeping with an ambitious capital city.”