Hotels and guesthouses outside of the main cities have had a disappointing start to the summer according to the Irish Hotels Federation.

It found that over half of hoteliers are seeing an increase in business but that is largely confined to the urban centres of Dublin, Cork and Galway and it is largely concentrated around business and event tourism.

The anticipiated rebound in the rest of the country has largely failed to materialise.

The IHF points out that they are working off a low base with visitor numbers down 30% since the peak in 2007.

When asked about the outlook for their business over the next twelve months, 50% of hoteliers indicate they are optimistic; this compares to 64% with an optimistic outlook this time last year.

Results of the survey show an overwhelmingly positive response to the Government's decision to retain the 9% tourism VAT rate which the ferderation says is providing a vital lifeline for many businesses in the sector.

Nine out of ten (93%) hoteliers say the measure will continue to have a positive impact on business into 2013 while 50% say they are likely to take on additional staff over the next year as a direct result.

Tim Fenn, Chief Executive, IHF states that, despite an actual decline in visitor numbers for the first five months of the year, hoteliers had been optimistic for an upturn in business this summer but this has not materialised outside the large cities. He says, "Performance has been patchy at best and we're now expecting business levels to be flat in many parts of the country which is severely disappointing given the very low visitor base we're working off at 30% less than the peak in 2007."

46% of respondents are seeing an increase in business from the island of Ireland, 44% from Britain and US, 32% from Germany and 20% from France.

Hotels and guesthouse owners say the cost of local authority rates is the most pressing issue when it comes to their business followed by utility costs (electricity and gas), wage costs, excess capacity, weakened consumer confidence and limited availability of credit.