For some, it was about as welcome as a kazoo in the middle of Swan Lake. Poundland, prince of budget shops, was unveiled last week on Edinburgh’s Princes Street, once the most exclusive stretch of shopping real estate in Scotland.

Not long ago, the appearance of the no-frills retailer on this classic boulevard would have seen locals produce smelling salts. Across the road, though, in stately Princes Street Gardens, another interloper is causing much more consternation. For the next month or so, this green space that sits in front of Edinburgh castle will be done up like a cheap Christmas tree and made to resemble a Bavarian village in winter – but only if you’ve never been to Bavaria.

Each year, the Christmas market occupies a little more of these gardens. Last week, the organisers proudly announced that there would be a record 163 outlets, most of them specialising in the sort of festive tat which loses its allure before the first Christmas hangover has evaporated.

Their plans did not go down wellwith some of the residents of a city that prides itself on its gentility. In a letter to the National newspaper, one aggrieved local felt moved to liken the market to a shanty town in Kowloon after the Chinese Communist revolution.

Elsewhere, Edinburgh World Heritage, the august organisation charged with protecting the city’s status as a Unesco world heritage site, was hardly less withering, claiming the market “clearly disrupts this magnificent environment to a very great extent” and warning that future events should be “more sensitive to the exceptional environment”.

Underbelly, the company that hosts the market, was defiant and insisted that the event, which is expected to draw 100,000 visitors a day, “both befits the environment and is sympathetic to it”.

The company received robust backing from Roddy Smith, the chief executive of Essential Edinburgh, the association that represents hundreds of city centre retailers and food and entertainment businesses.

The chap who compared the Christmas market to a shanty town is doing a disservice to the world’s shanty towns. David Black, author

Smith accused critics of pursuing a narrow agenda with attitudes that could threaten Edinburgh’s lucrative programme of winter festivals. “They speak very well and articulately for their own groups and members,” he said, “but they do not speak collectively for the city’s resident and business population.”

The Christmas civil war being waged in Scotland’s most desirable tourist destination is part of a much larger struggle for Edinburgh’s soul and its essential character.

The city has become one of the UK’s biggest Airbnb markets amid claims its centre is being hollowed out as long-term residents are slowly suffocating under the pressure of short-term lets before packing up and leaving for good.

Some lifelong residents of Edinburgh say they’ve forgotten what the original city looks like as it gets submerged in a bewildering succession of festivals ranging from the dominant and all-powerful international festival and fringe right through to the “winter festival” season, which culminates in the four-day lockdown of Edinburgh’s Hogmanay.

The author and academic Simon Pia said: “The city is prostituting itself and is beginning to look like a posher version of Blackpool.”

The architectural writer David Black is a long-term critic of Edinburgh’s council, which he holds responsible for jeopardising the city’s globally renowned built heritage. He feels the Christmas market is merely the latest in a dismal suite of planning decisions that have adversely altered the essential character of the capital’s centre. These, he said, have forced him to sell up and get out of the city he has loved and lived in his entire life.

He said: “The chap who compared the Christmas market to a shanty town is doing a disservice to the world’s shanty towns. The scandal of some of the recent developments at the east end and west end of Princes Street truly beggars belief. And – thanks to a slide in the value of the pound, famous visitor attractions, budget airline deals and an explosion of budget hotel rooms and managed apartments – the hordes are pouring in, and the city is dying from exhaustion, despair and depopulation.”

In Princes Street Gardens, down contrived alleys full of Hansel and Gretel cottages, you encounter the smell of burnt onions and grease, and memories of childhood holidays in Blackpool or Scarborough. Two large blue industrial bins flank the entrance, and three fast food stalls stand in close competition. A rudimentary survey of half a dozen visitors reveals little more than resigned acceptance. “It is what it is,” is the common theme.

Somewhere in the middle of this end-of-the-pier show is the modern extension to the National Gallery, housing some of the world’s finest art. It seems an apt metaphor for what Edinburgh is doing to itself.