The Irish Refugee Centre has said that hotels are not suitable long-term accommodation for people seeking asylum.
It comes after the Department of Justice said the Grand Hotel in Wicklow town is to be opened as a direct provision centre in the next two weeks.
It is the second hotel announced as a direct provision centre within the last week.
Last week, it emerged that there were plans to open a direct provision centre at the Shannon Key West Hotel in the village of Rooskey, on the Roscommon/Leitrim border.
The Department of Justice has had to find alternative accommodation as direct provision centres are now at full capacity.
At the beginning of this year, the Reception and Integration Agency published a notice in newspapers looking for businesses that were in a position to offer accommodation on behalf of the State.
The Grand Hotel in Wicklow town was one of those businesses.
There are around 35 direct provision centres across the country, accommodating almost 6,000 people who are seeking asylum.
Spokesperson for the Irish Refugee Council Nick Henderson said hotels are not a long-term solution.
He said: "This may add short term capacity but if the centre will be the same as other direct provision centres, then that would be problematic.
"This means there has to be the ability to cook for oneself, own-door accommodation and I suspect, given that this arrangement has taken place quite quickly, this is not the case."
The Grand Hotel is a well-known hotel that caters for a lot of tourists, especially over the summer months.
In a statement, the Department of Justice said that around 100 people - made up of families and single people - would be accommodated at the hotel, which has just 33 bedrooms.
The contract is for a fixed-term of one year and residents will be from a variety of countries, including Nigeria, Pakistan and the Democratic Republic of the Congo.
The Department of Justice did not disclose how much it is paying to lease the property.
The hotel will be a huge loss to the local area, according to local Fianna Fáil TD Pat Casey.
"It probably will now be the only county town in the country that will not have an operating hotel and that is disappointing," he said.
There has been no consultation with people in the town so far, but a meeting is due to take place between officials from the Reception and Integration Agency of the Department of Justice and local councillors on Thursday night.
Meanwhile, more than 200 asylum seekers who were facing losing their homes before Christmas have learned that their direct provision centre will remain open until the summer of next year.
Residents at the Clondalkin Towers Hotel in Dublin were told last month that it would close on 3 December.
However, talks have been taking place between the Reception and Integration Agency and the contractor for Clondalkin Towers accommodation.
It is understood that it has now been agreed to keep the centre open until the summer of 2019.
Clondalkin Towers Hotel has operated as a direct provision centre since 2006. It is the largest direct provision centre in the capital.
More than 225 people live there, 80 of whom have refugee status, but remain there because they have no alternative accommodation.
The Jesuit Refugee Service works with residents in the centre.
Additional reporting Sinéad Hussey