If the perceived reduction in Ireland's "value for money" is not addressed, it will pose serious threats to the future success of the tourism industry, a study has found.
The draft report, revealed by RTÉ news yesterday, was compiled by economic consultant Mr Paul Tansey for the Irish Tourist Industry Confederation.
The report said the industry had reached a turning point, and it appeared "that the tourism boom has been punctured".
Ireland was suffering a serious erosion of competitiveness and there also appeared to have been "a deterioration in overseas visitors' perceptions of product and service quality".
The report called for a tourism development strategy to be completed "as quickly as possible" and said it should look at issues such as price competitiveness and product innovation.
The Irish Tourist Industry Confederation said the report was about much more than just inflation rates and prices.
Mr Brendan Leahy, the confederation's chief executive, said it was a significant effort to draw all the economic factors together to help seek a strategy to return tourism to growth.
He said the report would be finalised within three weeks and would then be presented to the Government.
The report has been described as a "wake-up call" for the tourism sector by the Minister for Arts, Sport and Tourism, Mr O'Donoghue.
He said it confirmed what he had been saying since he became Minister for Tourism.
"It is true that after 10 years of uninterrupted growth, the industry may have become a little complacent and, therefore, I think it is very important that the industry looks inward upon itself and decides to take some radical action," he said yesterday.
Mr O'Donoghue pointed to a survey in 1995, which showed that almost two-thirds of European visitors surveyed rated Ireland as giving very good or good value for money. It was very disturbing that this satisfaction rate had fallen to one third by 2001, he said.
The Minister said the industry must try to bring down prices to ensure value for money. He said he was setting up a new national tourism development authority to review all these issues and devise new strategies.
Ms Kathleen Lynch, Labour spokeswoman on tourism, said the Government must "act speedily" on the report's findings.
She said Mr O'Donoghue had been "eerily silent during what has been one of the worst seasons in history. He now has a chance to act with vigour".
The Irish Hotels' Federation would not comment on the report because it was still in draft form, said its chief executive, Mr John Power.
However, he insisted that hoteliers were not profiteering in the current climate and said the rising cost of insurance, wages and other inputs were forcing up their prices.
"For every euro earned in a hotel, 35 to 45 per cent goes out in wage costs," he said.
Some operators had seen their insurance premiums rise by up to 200 per cent in the past year, Mr Power said.
Introducing set fees for injuries in personal injury claims would help reduce these costs, he said.
