The Irish Hotels Federation expects almost a third of the €6.7 billion debt owed by Ireland's hotels will be written off.

Speaking on Morning Ireland, the Irish Hotel Federations's president Michael Vaughan said "about a third of the debt will be refinanced with the exiting banks Bank of Scotland Ireland and the IBRC".

"The exiting banks will probably write down debt to market value in order to exit. It could account for maybe €2 billion of the debt in total," he said.

A report commissioned by AIB estimates the 850 hotels here have a combined debt of €6.7 billion and that 300 of them are currently in financial difficulty.

However, the report also revealed that almost three out of four hotels surveyed are expecting business to improve over the next three years.

It also showed that 54% of hotels saw turnover increase last year, with 26% reporting a decrease. 55% of hotels said they plan to upgrade and refurbish their properties over the next three years.

According to the research, 42% of hotels have not sought finance from their banks in the last 12 months. Of those who sought finance, 59% needed a change to terms of their existing finance or to renew existing finance. Just 12% wanted a new loan.

The report also found that hotels' guest profiles are changing with hoteliers reporting a rise in the number of couples, over 55s, domestic tourists and wedding relating business.

Commenting on the report, the Irish Hotels Federation's chief executive Tim Fenn said that the outlook for the hotels sector is more upbeat compared to last year.

But he said that ''significant'' challenges remain in terms of high operations costs, including local authority rates and the attempt to reintroduce sectoral wage-setting mechanisms.