Communities are being 'decimated' with their hotels being used by the State to house refugees and asylum seekers.
A new Irish Tourism Industry Confederation (ITIC) report estimates the tourism and hospitality industry will be hit with additional €1.4 billion payroll costs by 2026 as a result of Government policy.
It says that measures including the move to a living wage, PRSI increases and pension auto-enrolment are all putting "significant pressure" on the sector.
The group is also calling on the next Taoiseach to move tourism to Enterprise portfolio due to it being a "vital economic engine" for the country.
ITIC Chair Elaina Fitzgerald Kane told Newstalk Breakfast a lack of a hotel has knock-on effects.
"If you look at accomodation now 20% of all tourism beds - not just hotels, it's self-catering, etc - are now contracted to the State," she said.
"There's lots of communities that are absolutely decimated.
"If you go to parts of Clare where it's at 30% we've seen and heard a lot of talk about community hotels where hotels are the hub in particular areas."
'Not just accommodation'
Ms Fitzgerald Kane said when those types of hotels are contracted out it has an impact on the town.
"For every euro that's spent on tourism accommodation an additional €2.50 is spent on ancillary services [such as] retail, etc so the hit is absolutely huge," she said.
"It's not just on accommodation; it's on car hire, there's a need for a VAT equalisation measure there.
"If you look at Dublin Airport and the under-utilisation of our regional airports as well".
Recovery
Ms Fitzgerald Kane said the constraints on the tourism sector is putting a "handbrake" on economic recovery.
"Tourism is actually the only sector that hasn't recovered since the pandemic," she said.
Ms Fitzgerald Kane acknowledged there are elements of price gouging which she said she's "not comfortable with".
"There's 64,000 hotel beds for sale across the country, 23,400 of those are in Dublin, but often we're talking about the last room or the last few rooms and that doesn't represent the value," she said.
"We'd always say [to] vote with your feet; if something isn't of value to you don't purchase it.
"They're the decisions that I would make as a consumer and that's something I'd urge people to do," she added.
The report also calls for the restoration of the 9% VAT rate for the sector, changes to employer PRSI rates and an annual enterprise support package.
