CERT's survey revealed 68 per cent of hoteliers had changed their business tactics in response to the foot-and-mouth outbreak and the events of September 11th last year.

Employment levels in the Irish hotel sector are holding their own and even improving, despite depressed conditions for the tourism industry this year, with key US visitor numbers having fallen to levels not seen since the mid-1990s.

A new survey for the six months to June 30th by the State's tourism employment agency, CERT, shows 72 per cent of hoteliers have maintained or increased staffing levels compared with last year. And, despite the downturn, 40 per cent of hotels said they expected full-year revenues to increase in the current period.

However, the study - Tourism Business & Employment Survey 2002, Snap Shot Study of the Year to Date - also reveals growing concern at the cost of doing business.

Of the hoteliers surveyed, 72 per cent said operating costs were increasing faster than the rate of inflation, a fact that some believe may undermine tourism in the State in the long term.

Of most concern is the higher cost of insurance, with 89 per cent of respondents claiming higher premiums are affecting their business.

Hoteliers are also worried about the higher cost of labour, food supplies, rates, energy and refuse charges. The cost of and delays in securing work permits for non-nationals is affecting the hotel industry, as is the high cost of training courses for staff.

A jump in prices around the time of the introduction of the euro was also cited as having run up the cost of doing business.

Mr Shaun Quinn, chief executive of CERT, said that, while the employment figures were to be welcomed, the marked increase in costs was now a real worry for hoteliers, particularly in light of falling visitor numbers.

"Somebody said to me the other day: 'It's like operating in a 1996 market [in terms of demand] but having to pay 2002 costs'," he said.

He added that a sharp jump in the cost of insurance, "which has been in multiples, not a small increase", is something that needs to be tackled. "But on things like labour costs, people have to accept that we are operating in a tight labour market, that there's nothing you can do about that. . . and so people have found themselves paying a lot more for labour."

Before this year, a shortage of skilled staff would have been the main concern for hoteliers but costs were now more to the fore, he said.

The new study shows 54 per cent of hotels are employing the same level of staff as a year ago, while 18 per cent are employing more. However, Mr Quinn said real growth in the level of staff employed by hotels may not occur until 2005 or 2006.

The tourism industry, he said, must be mindful of the long term and focus on remaining competitive on costs.

Bord Fáilte spokesman Mr John Brown said the tourism industry around the globe had become more competitive since the economic downturn after September 11th, with a more concerted effort by countries to attract visitors. In that climate, he said, price sensitivity would be an even bigger factor for would-be holiday makers.

"However, price is not the only factor, if it were \ wouldn't be in the tourism business at all because we have never been a cheap destination."

The majority of operators concentrated their efforts on markets that presented opportunities including the domestic market, Northern Ireland, Britain, Germany, Scandinavia and Japan.

More than half, 58 per cent, of those who had changed tactics dropped their prices, with some hotels reporting reductions of 20 per cent.