Macdonald Hotels & Resorts is investing more than £30m in a 215-bedroom site in Manchester city centre.
The new hotel, due to open in October next year, will occupy the former BT building near Manchester Piccadilly train station, which has been vacant since the telecoms giant moved to another site in the city.
The £33m property will challenge Salford's Lowry Hotel and Manchester's "big three", the Midland, Hilton and Radisson Edwardian.
It will feature glass cladding all round and conference and event facilities capable of holding up to 280 delegates, equipped with LCD screen-to-laptop systems and projectors, Wi-Fi and broadband connections. There will also be a 150-seated restaurant on the first floor.
David Guile, deputy chief executive at Macdonald, said: "This hotel is certainly one of group's most ambitious developments to date and will be an excellent addition to our existing portfolio of premium four and five-star properties across the UK.
"Here we have a unique opportunity to give Manchester a contemporary and luxurious hotel whilst retaining the heritage of one of its well-known landmarks."
Macdonald Hotels & Resorts, which operates 68 hotels and six resorts in the UK and four resorts in Spain, controls a business with an annual turnover of around £250m.
By Daniel Thomas